Sensex Loses 1,000 Points in August, Right Time for Investors to Enter?

Posted: 23/08/2013 in News
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Sensex Loses 1,000 Points in August;

Right Time for Investors to Enter?


NEW DELHI: The S&P BSE Sensex has Plunged over 1,000 points so far in August, weighed by a host of factors, including weakness in the currency, possible tapering of US Fed’s bond-buying program and threats of ratings downgrade.

The Benchmark Index has dropped from the level of 19,345.70, observed on July 31, to 18,312.94, registered on August 22, making for a fall of 1,032.76 points, or 5.34 per cent.

Benchmark indices witnessed a strong short-covering rally in the past few days, after being in oversold levels since last week, despite weakness in rupee.

According to Analysts, it is not a dead-cat bounce and market has the potential to move higher up to 5,500 from current levels despite global headwinds and investors can look at individual stocks which are bargain bets at this point in time.

“Given the fact that news flow out of India has not been particularly encouraging and to that extent obviously the mood of the foreigners and of investors in general has soured; it looks like the worries are overdone,” Said Dhawal Mehta, CFA, Head-India Equity Investments, Reliance Asset Management (Singapore), in an interview with ET Now.

“I am sure that there are people out there who Probably knows the market well or the economy well and are thinking that it is now a Good Time to actually have a fresh look at India,” he added.

Given the fact that Performance of the market over the last two months has been disappointing, Mehta is of the view that it is an Opportunity for people who are looking to get into the market.

Be it a Bear or a bull run, Stock Market always offers investment opportunities. At least four dozen mid-cap stocks have bucked the downturn to offer returns as low as 5% to as high as 100% despite the BSE Midcap Index falling by 26% till now since January.

In the past eight months, BSE 30 share benchmark Sensex has given a negative 6 per cent return, giving little clue for investors about its future direction, while BSE Midcap and BSE Smallcap indices fell sharply, ET Reported.

The 50-share Nifty index which has slipped below its crucial support level of 5300 in this week, bounced back on Thursday; however, Experts feel that the rally might just be short-lived till 5500 levels or so.

The rally may not last long, say analysts. The macro economic situation remains a concern and if situation doesn’t improve, it may hurt the corporate earnings going forward.

Measures Adopted by the Reserve Bank of India (RBI) to support the currency has done precious little; but, in turn has sucked much needed liquidity from the system.

“The Tight Liquidity measures were like a nail on the head of the Indian markets and everywhere around the world central banks are actually easing rates to revive growth,” said Alpesh Sharma, Director & CIO, Alchemy Capital Management in an interview with ET Now.

Along with Domestic factors, concerns of US Federal Reserve winding down its $85 billion monthly bond purchase program as early as September was also fuelling negative sentiment.

Commenting on the uncertainty revolving US Federal Reserves tapering plan, Alpesh said, “My Sense is that a large part of the tapering move which started in May is priced into the market.”

“What going forward will move the markets is when the RBI reverses its tight liquidity stance. Clearly, we cannot have a situation where growth is slumping and have very tight liquidity,” he Added.

Alpesh  is of the view that by next month when the new RBI governor comes in, we will have to wait and watch what he does to reverse this liquidity stance. So that could be significant trigger for markets going forward.

So What to ‘Buy’

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