Reference Auto

The Sensex had fallen to its six-week low at 16,639 points a couple of days ago but shouldn’t investors find this as an opportunity to pick up stocks as the markets could remain buoyant at least in the short term (say the next six months)?

So, what could spur the stock markets? Firstly, the corporate results. Most companies have performed fabulously this quarter, especially the big names.

For instance, recently ITC’s net profit rose 20 per cent, Biocon’s by 12 per cent and Bharat Heavy Electricals Ltd’s by 13 per cent. And, a host of firms may be lining up big plans seeing such robust profits (although it is too early to say that bullishness would soon be back in the economy).

The markets also reacted positively to a grapevine that the Reserve Bank is unlikely to tinker with the rates this time.

Moreover, with the festival season arriving, demand for products and services could go up manifold and the stock markets (like every year) will turn robust during this time of the year.

A few days ago, the Sensex slid 206.23 points, or 1.22 per cent, to 16,639.82 points. This low was last seen in the first week of June.

Shares of ITC – one of the Sensex’s major components – ended 2 per cent down, ahead of its results. The market men were wary of ITC’s performance. But with the tobacco giant showing a 20 per cent rise in profit the next day, the markets are breathing easy.

The Sensex’s fall to a new low recently saw 22 stocks (that include Tata Power, Wipro as well as State Bank) end lower. Tata Motors was hit badly, down 3.8%.

There are certain worries though as heavy selling has been seen in Mid-Cap and Small-Cap stocks, which indicates that individual investors are shunning the bourses (which they actually should not). Both the categories have seen a fall of over 2 per cent.

Also, another big mover and shaker, the foreign institutional investors or FIIs, are on a selling spree and recently withdrew over Rs 580 crore, as per market data, leading to a sombre outlook.

However, another area of concern is the deficient rainfall, which may hit agriculture production. If this happens, then the stock markets could remain subdued during the festive season also. But the Met office says the monsoon will do some catching up, and within August, the rains would become normal.

So, isn’t this a buying opportunity. If the monsoon doesn’t play spoilsport, then the stock markets may turn buoyant by October. So, here would be an opportunity for investors to pick selective stocks (and mutual funds) at rock-bottom prices and sell them at the height of the festive season in December, earning a handsome profit in the short-term.