Well, firstly., the market movement is usually unusual... :-) it is always unpredictable.
Secondly, should we try to judge the market or its direction?. I would rather say NO. Because, it is virtually impossible to judge the market (obviously due to the first point above). :-)
So, what should we look for? Let me try to give my view:
From the economic factors, at the national level, things are not that bad. Of course, inflation is a bit of a concern and to a certain extent political situation (the scams & national security issues). But, I believe, the corporates are doing well. The results are not that bad.
At the global level, things are not quite clear. Mixed news always flows and influences the market in either direction. For now, a lot of negative news are getting factored by the market. But again, it will always not go in one direction...
From the technical factors, Nifty was 4967 on Jun 8 2010 and reached all-time high of 6336 on Nov 8 2010. Now, it is retracing from this peak. The 38.2% retracement is 5813 which is broken already. 50% retracement is 5651 which is also broken. We now need to see if Index is pulling up from this level or is it consistently closing below 5651 (New resistance). The next retracement level (61.8%) is 5500, which will be the next support for the Index. If this is broken, then, the intermediate trend of the market would be considered down. So, unless there are very bad news flowing in, the market might find support @ 5500 and rebound...
We should also note that, the previous high reached by the Index was not a result of a broad-based movement of all the stocks (within the index and outside the index). Only certain sectors or stocks made a big move to take Index to its highest level.
Having said this, While the Index has shed by 10-12%, if you look at individual stocks in the index, it has become a lot cheaper. For instance, in the Banking sector, SBI touched its peak of 3515 on 5 Nov 2010 and is now 2653, which is almost 25% down from its peak. In the same sector, ICICI Bank has not come down to this extent...
Likewise, RelInfra, In Jun 2010, it touched its year high of 1224, but now it is just within 3% of its year end low of 695 (Yesterday close:716.40). Lot of other stocks have also come down drastically., Suzlon, JPAssociates, Unitech, DLF, TTML, Kotakbank, Lakshvilas etc. I think there are some opportunities in these stocks.
On the contrary, the tech stocks have not come down in this downside journey of Index. Infosys, TCS, Wipro, HclTech are all near its year high. So, upside potential may be capped for now unless there are some very exciting news in the making for tech sector...So, may be, when the manufacturing, captial goods, auto sectors are moving up, probably tech sector will come down... This is just my assumption. :-)
To conclude, rather than judging the market and its direction., we should boil down do individual stocks and analyze its price position/performance and take decision accordingly...Indepedent of the market direction in the short term, some of the above mentioned stocks would most likely earn good returns in the medium to long term...
I had bought HCL-Insys @ 92 when the market was around 6200 and now I'm booking profit in it @ 110 levels when the market is around 5600. This gives roughly 20% profit in about 3 months period, even when the market has come down by 10-12%.
In another case, after I have booked profit, its price would have still gone up. For example, I had earlier booked profit in SBI around 2900 levels. But, after that, it went up to 3500 levels. I have been only watching it and now it is available cheaper...So, I would now look forward to take some position in it...
That is why, I normally confine myself to the index based stocks and have faith in them and enter when they are beaten down by the market...
selva, thanks for the analysis, gud to point that in the present situation we have to concentrate on indivudual stocks based on their merits and past performances, Rightly mentioned that the Index stocks should be the right consideration. But don't you think some midcap stocks can also be considered, as their market prices is low and the investible amount required is also small.
Regarding the investible amount, I think it would more boil down to the percentage of returns and to a certain extent volatility of the stock. For example: take Herohonda. It is a very good dividend paying stock and is also quite volatile in the recent months. If you look into it closely, it is moving in the range of 1700 - 2000. Even if you buy 5 shares and get the entry correct, we can easily swim in it's swing. On the other hand, I also hold TTML, which is around Rs. 19. In both the stocks my investment amount will be fixed. Only the number of shares would vary. Hope you get the point I'm trying to highlight.
Regarding midcap, I wouldn't entirely rule out midcap stocks. In my terminology, index stocks would mean any index and not just nifty index. That is Nifty index, Junior Nifty, Nifty Midcap, BankNifty etc. So on the Midcap space as well, I'll watch those in the Nifty Midcap... Let me know the scrips that you watch in the Midcap space. I'll review and give my view. And surely will also consider investing in them...
I like to answer this question... :-)
ReplyDeleteWell, firstly., the market movement is usually unusual... :-) it is always unpredictable.
Secondly, should we try to judge the market or its direction?. I would rather say NO. Because, it is virtually impossible to judge the market (obviously due to the first point above). :-)
So, what should we look for? Let me try to give my view:
From the economic factors, at the national level, things are not that bad. Of course, inflation is a bit of a concern and to a certain extent political situation (the scams & national security issues). But, I believe, the corporates are doing well. The results are not that bad.
At the global level, things are not quite clear. Mixed news always flows and influences the market in either direction. For now, a lot of negative news are getting factored by the market. But again, it will always not go in one direction...
From the technical factors, Nifty was 4967 on Jun 8 2010 and reached all-time high of 6336 on Nov 8 2010. Now, it is retracing from this peak. The 38.2% retracement is 5813 which is broken already. 50% retracement is 5651 which is also broken. We now need to see if Index is pulling up from this level or is it consistently closing below 5651 (New resistance). The next retracement level (61.8%) is 5500, which will be the next support for the Index. If this is broken, then, the intermediate trend of the market would be considered down. So, unless there are very bad news flowing in, the market might find support @ 5500 and rebound...
We should also note that, the previous high reached by the Index was not a result of a broad-based movement of all the stocks (within the index and outside the index). Only certain sectors or stocks made a big move to take Index to its highest level.
Having said this, While the Index has shed by 10-12%, if you look at individual stocks in the index, it has become a lot cheaper. For instance, in the Banking sector, SBI touched its peak of 3515 on 5 Nov 2010 and is now 2653, which is almost 25% down from its peak. In the same sector, ICICI Bank has not come down to this extent...
Likewise, RelInfra, In Jun 2010, it touched its year high of 1224, but now it is just within 3% of its year end low of 695 (Yesterday close:716.40). Lot of other stocks have also come down drastically., Suzlon, JPAssociates, Unitech, DLF, TTML, Kotakbank, Lakshvilas etc. I think there are some opportunities in these stocks.
On the contrary, the tech stocks have not come down in this downside journey of Index. Infosys, TCS, Wipro, HclTech are all near its year high. So, upside potential may be capped for now unless there are some very exciting news in the making for tech sector...So, may be, when the manufacturing, captial goods, auto sectors are moving up, probably tech sector will come down... This is just my assumption. :-)
To conclude, rather than judging the market and its direction., we should boil down do individual stocks and analyze its price position/performance and take decision accordingly...Indepedent of the market direction in the short term, some of the above mentioned stocks would most likely earn good returns in the medium to long term...
Happy Investing...
Selva.
I would like to give few real-time cases.
ReplyDeleteI had bought HCL-Insys @ 92 when the market was around 6200 and now I'm booking profit in it @ 110 levels when the market is around 5600. This gives roughly 20% profit in about 3 months period, even when the market has come down by 10-12%.
In another case, after I have booked profit, its price would have still gone up. For example, I had earlier booked profit in SBI around 2900 levels. But, after that, it went up to 3500 levels. I have been only watching it and now it is available cheaper...So, I would now look forward to take some position in it...
That is why, I normally confine myself to the index based stocks and have faith in them and enter when they are beaten down by the market...
selva, thanks for the analysis,
ReplyDeletegud to point that in the present situation we have to concentrate on indivudual stocks based on their merits and past performances, Rightly mentioned that the Index stocks should be the right consideration. But don't you think some midcap stocks can also be considered, as their market prices is low and the investible amount required is also small.
Regarding the investible amount, I think it would more boil down to the percentage of returns and to a certain extent volatility of the stock. For example: take Herohonda. It is a very good dividend paying stock and is also quite volatile in the recent months. If you look into it closely, it is moving in the range of 1700 - 2000. Even if you buy 5 shares and get the entry correct, we can easily swim in it's swing. On the other hand, I also hold TTML, which is around Rs. 19. In both the stocks my investment amount will be fixed. Only the number of shares would vary. Hope you get the point I'm trying to highlight.
ReplyDeleteRegarding midcap, I wouldn't entirely rule out midcap stocks. In my terminology, index stocks would mean any index and not just nifty index. That is Nifty index, Junior Nifty, Nifty Midcap, BankNifty etc. So on the Midcap space as well, I'll watch those in the Nifty Midcap...
Let me know the scrips that you watch in the Midcap space. I'll review and give my view. And surely will also consider investing in them...