Reference Auto

Scams have been pounding the markets again, taking a toll on the Sensex and other key indices but the outlook for next year is bullish. Fear of a Korean conflict has allayed but the Raja scam and Radia tapes controversy just doesn’t seem to die down.

The Sensex of the Bombay Stock Exchange had lost 458 points or 2.29 per cent last week to end at 19,508.99, after investors offloaded, mainly in banking stocks, owing to a hike in deposit rates.

The National Stock Exchange’s (NSE) 50-share Nifty also closed the week lower at 5,857.35 points, down 2.26 per cent.

According to the Securities and Exchange Board of India or Sebi data, foreign institutional investors or FIIs sold stocks worth $702.89 million during the week. The BSE mid cap index closed 6.05 per cent lower, while the BSE small cap tanked 9.21 per cent.

Among top weekly gainers in the Sensex stocks were ACC, Wipro and NTPC, while the top three losers were SBI, Reliance Infra and DLF.

The US markets, however, closed higher for the second consecutive week as the Obama administration got a boost to extend tax cuts. The Dow Jones Industrial average rose 0.25 per cent to close at 11,410.32 points, while the S&P 500 gained 1.28 per cent at 1,240.4 points.

The Nasdaq Composite gained 1.78 per cent to 2,637.54 points. Asian bourses, on the other hand, remained cautious on fears that China’s central bank will raise interest rates.

Well, there seems to be good news for the Sensex. As per a poll by Reuters, the BSE Sensex could surge 20 per cent by the end of next year on the back of the growing economy and buoyant corporate earnings that have given a fillip to overseas inflows. The Sensex is likely to surge to 23,350 by end-2011, according to the poll.

The benchmark index (Sensex) will by mid 2011 rise 12 per cent to 22,000, the poll taken last week showed. This is above the 21,500 that was seen in a poll in September.

So, going by the poll, it could be a judicious move if some money is put into the stock market now. A good way of judging a stock will be to see its past performance, which we feel is the key reason to drive an investment decision.

Other factors to note before an investment is reputation of the company and its management, dividends given in the last five years, bonus and rights shares offered, the company’s performance in the last five years (a very important factor), how the sector, in which the company is a part of, is performing and what lies ahead for the sector.

Also, the public float is to be taken into account, that is, what per cent of the shares is held by the public. The more, the better.

So, while taking into account these factors, also take a peek at the company’s 52-week high and low. This information can be found on the BSE website or the stock pages of a financial daily. If the stock value is near its low, then it’s the right time to pick the stock. If it’s near the high, the share could be overpriced and should ideally be avoided.