Indian Stock Markets – Neither bullish nor bearish?

Some investors are waiting for a steep drop in the Indian stock market indices to buy stocks at lower prices from now and at the same time some investors are waiting to sell their stocks at the new highs in the coming months expecting the proposed Indian budget would trigger growth and overall economic development.

Many of my blog readers quizzed to me the question which side of the curve I subscribe to? Before making a certain view on the subject I look at the following recent developments in the economy.

The inflation rate has gone to the negative territory for the first time after so many decades.

The National Stock Exchange (NSE) has decided to calculate its benchmark indices on free float market capitalization basis effective from26th July.

Since the beginning May CBOE volatility index is moving in a band between 26 and 33, indicating lack of nervousness among investors. At the same time it has not declined to its bull-market levels below 20 either implying that investors have not turned overwhelmingly bullish yet.

After pumping in Rs 24,837 crore into Indian stocks between mid-April and end-May, FIIs have been net sellers of equity worth over Rs 3,670 crore ($757 million) in the last two weeks.

The latest data released by fund tracker EPFR Global, which notes that global investors appear to be reallocating from emerging market stock funds to US money market funds.

For the week ended June 25, while investors pulled out a net $1.87 billion from Asia (ex-Japan), Latin America, EMEA and the diversified Global Emerging Markets Equity Funds, Money Market and US Bond Funds absorbed $25.9 billion and $1.72 billion respectively.

Since March Sensex gained 81 per cent pushing up prices across the large-cap space; valuations have become rather stiff especially compared with the developed markets and ran ahead of the fundamentals with most emerging markets now trading at 15-17 times the 2010 earnings, up from 7-10 times in the beginning of March 2009.

I am also NOT looking for the markets to make a sustained thrust beyond the following projections: NSE  Indices   3951-4146-4693-5031 (Last close,26^th June- 4375.50(+3.15%).

But the overall trend does call for greater caution on the part of retail investors.

1 Comment

Filed under Mind Over Matter

Tags: Indian Stock Markets, Nifty Stocks, NSE Index Outlook, Indian Economy, NSE, BSE, Indian Capital Market, Indian elections, Indian politics, Dalal Street, indian buget