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Opened With A Bang, But Experts Advice Caution

Monday, October 31, 2011
By Manik K. Malakar

The markets on Friday’s appeared to have heralded in Samvat 2068 with a bang, with the bench mark Sensex gaining by almost 500 points, tracking good news from abroad. However, would this be the start of a bull run, and should the retail investor jump in? Market experts are doubtful on that one.

 “There is a renewed confidence that things would settle down and therefore there was short covering in the markets,” says Harshvardhan Roongta, a Certified Financial Planner with Roongta Securities. “The markets were much in line with the overseas markets,” says Alok Churiwala, MD Churiwala Securities.

“There has been a lot of positiveness that the RBI would not hike rates further,” added Roongta. Specifically good GDP numbers by the US had a contributory effect on the markets” was the view of Milan Bavishi, Head Research, Inventure Growth and Securities.

Within the sectors that comprise the Sensex, it was the metals and the realty sectors that gained the most in Friday’s trading. The metal sector gained by 723  points, a gain of 6.34 % and a move that has confounded some analysts since metal prices are easing. However Indenture’s Bavishi says, “The rally in the markets was boosted by the stock performance of the metal stocks like Hindalco, Sterlite, Jindal Steel and Tata Steel, which were up in the range of 6 to 10 %. Index heavy weight Reliance Industries too was up close to 3 %, supporting the overall markets.”

Realty is an index that is usually heavily beaten down, but gained by 5.34 % (97.51 points) in Friday’s trading. “The gain could be because interest rates are stabilising or may even decline,” says Roongta. In such a scenario demand for realty would gain, as this is a very interest rate sensitive sector. “The expectation is that the RBI would not hike rates further so this is a positive for the sector,” he said.

So from the broader point of view is this the start of a bull run? Analysts are doubtful of that. “It is too early to rejoice. I would adopt a wait and watch attitude,” says Roongta.

In fact, events have not fundamentally changed from what they were a little while ago.

So what would be the cues that would guide the markets going forward? “Investor’s focus will turn to the G-20 meeting next week in Cannes in Southern France where details of Thursday’s anti-crisis measures for the Eurozone are likely to emerge,” says Amar Ambani, Head of Research, IIFL - India Private Clients.
What would guide the markets in the coming period and should the investor jump in?
In November according to inputs from Ambani, Indian equity markets would react to monthly auto sales, cement volumes, trade data and manufacturing PMI (Purchasing Manager’s Index).
 From the technical point of view market observers feel that there would be a range in which the markets would move. “The markets would be in the 16,500 to 18,500 range,” said Roongta. “The Sensex can go up to 18,200 ,” says Churiwala.
 “For the coming week of course the level of 5415 will play an important role. A crossover of the same will result into a quick flare up to 5500 levels. On the lower side the 5335 and 5270 levels will act as a major support,” said Shrikant Chouhan, Head, Technical Research, Kotak Securities. For retail investors, analysts do advise caution. “We advice caution before investing …” said Churiwala.

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