Long-term bullish trend intact

The Indian stock markets snapped three week-long losing streak last week when they closed 258 points higher on the BSE Sensex even as global peers yielded to terror attacks on Paris initially.

The markets preferred to shrug off terror attacks on Paris on Saturday of the previous week and responded positively to a few positives including announcement of hikes in FDI in certain specific industries or service segments besides recommendation of pay hikes by the 7th pay commission for central government employees.

When the markets reopened for the week under review, they were already beaten down significantly, initially on fears of the BJP losing in Bihar Assembly polls and then on the actual outcome of the polls as announced on Sunday, November 8. The terror attacks on Paris on Saturday of the previous week, an unexpected and a destructive event, could have pushed the markets further down in the week under review as it generally happens when such events occur.

But, except an initial fall in prices on Monday, the markets managed to close higher than the previous closing, on the very first day of the week since by that time, the government had already come out with a few positive announcements including hike in FDI limits in a few select segments of industries or service sectors.

It was therefore this very reason that helped the markets rise by 150 points on Monday and yet another 104 points on Tuesday. But, on Wednesday, the markets shed more than what they earned in the preceding two sessions. However, markets resumed their rallying mood on Thursday and regained a major ground lost in the previous session.

On Friday also, ebullient mood of the markets was intact and the Sensex which had rallied by nearly 217 points in initial trade and was trading significantly higher for a good part of the trading session but surrendered to the increased selling in last one hour. So, the market barometer on Friday closed higher by only 27 points.

With the Bihar polls going against the BJP and also terrorists striking the French city of Paris, the markets seem to have reached their bottoms that are now unlikely to break excepting in case of unexpected untoward incidents. However, this does not imply that the markets are now going to go up without interruptions. The expiry of derivative contracts in Futures & Options is the usual dampener for the markets this week.

The winter session of the Parliament is also scheduled to commence this week and with the defeat of the BJP in Bihar, aspirations of getting enough numbers in the upper house of the NDA going awry, it seems that the government might not be able to get the GST and Land Reforms Bills cleared this time too. Thus, if the government fails to get these crucial economic reforms bills cleared, it would be a fresh setback for the stock markets also.

The US Federal Reserve is also going to hike interest rate after a decade, in December. A hike in the US interest rate would be a further setback to the emerging markets including India. However, the foreign institutional investors have been nearly constant sellers of Indian equities for the past three months and only for the reason to take back their investible funds in the US on expectation of a rate hike there.

In the current month also they have net-sold shares worth about Rs 6,400 crore so far. Thus, though, the possible interest rate hike by Federal Reserve has already been factored in the market prices, an actual happening of the same might at least, put a scar on the Sensex, if not wound it deep under skin.

Although, the long-term primary trend in the Indian stock markets is bullish and prices of stocks and indices are going to go up, the near-term future trend hinges on upcoming events, largely through the Parliament.

Therefore, those investors who are far from being short-term traders or speculators, will certainly get golden opportunities to pick up good and blue-chip company shares in the next few weeks which they could never dream to buy in bullish markets due mainly to their unaffordable price levels.

Automobiles and ancillary companies are the best ones to be lifted from a perspective of three years investment period. The banking and pharma stocks will also generate handsome returns in long-term.