Reference Auto

The Sensex last week saw a marginal 160 points weekly rise (last Friday closing) but it was no reason to cheer as analysts had said the Reserve Bank of India or the RBI would raise the key rate, the repo rate (the rate at which the RBI lends to other banks), and this has actually happened which could put the markets in a bear grip soon (an opportunity for investors to put in their money so as to reap benefits in the medium to long term).

The RBI move has led to a further cause of worry for the real estate, auto sectors and India Inc as a whole.

The apex bank’s step will pave the way for costly loans and auto and real estate buyers will not take loans, leading to a significant slide in demand.

Also, industry and manufacturing will see a slump as companies may not opt for costlier loans. This could force them to withhold expansion and result in another temporary slowdown.

So, even in the medium term, the stock markets could remain in a bear grip.

The Sensex last week started higher at 18,592.19 points, moved in a range of 18,765.60-18,415.36 points before ending the week at 18,722.30 points, a rise of 0.86% from the previous week’s level.

Inflation could cause some worry till December and exports may be hit for a while, owing to the European crisis.

So, this isn’t great news for the stock markets and could stymie their growth at least until the festive season, beginning October.

But during an overall bearish or a subdued mood in the market what happens is panic selling of equities at undervalued prices whereas buyers are very few. Investors should do just the opposite.

It’s quite natural that during a severe downturn, people start getting that sinking feeling, thinking the world’s coming to an end.

Absolutely wrong! In fact, it’s just a new beginning and the right time to pick up stocks judiciously at rock-bottom prices and sit on them for the medium to long term. You will surely reap the benefits.

So, a bear market is an ideal time for investment but owing to the uncertainty it creates, most investors, including seasoned ones, stay away from the market.