Reference Auto

The stock markets are on a roll but does this indicate glad tidings?

The Bombay Stock Exchange’s benchmark index, the Sensex, has been rising for the past seven weeks (a record of sorts in an environment that indicates another global slowdown could hit us).

On Friday, the Sensex closed nearly 8 per cent higher owing to more inflows from foreign institutional investors or FIIs. But the quick rise is a cause of worry amid the global gloom.

The BSE index has seen a rise of 18 per cent this year itself. The main reasons for the Sensex rise or fall are the FIIs (who are the main movers and shakers). They infused funds worth nearly $4.5 billion this year. In contrast, they had withdrawn $500 million (net) last year.

On Friday, banking stocks like the State Bank of India and ICICI Bank were among the top gainers, owing to improved credit demand perception as the market predicted softening of interest rates by the Reserve Bank of India.

This would lead to higher demand for loans and smiles on the faces of bankers.

On the other hand, PSU Bhel ended 6.7 per cent higher at Rs 303.55, after surging by a whopping 14.3 per cent to its highest in three months.

On Friday, the BSE benchmark index closed 0.75 per cent higher, or 135.36 points more, at 18,289.35 points. This is the highest closing in more than six months. Among the Sensex stocks, 19 ended in positive terrain.

The broader 50-share NSE index closed 0.77 per cent higher at 5,564.30 points.

There are fears that the stock markets could see a correction, especially in the wake of an impending global slump. So, if you are planning to pick up some lucrative stocks and think that the price as well the time is ripe, you will only end up burning your fingers.

Moreover, economic parameters are not in sync with the stock market rise. The growth target of the country had to be pruned and could end up below the 7 per cent-mark. This is not good news for the bourses.

Also, with Iran displaying its nuclear might, and Pakistan and Afghanistan showing their solidarity with their Islamic neighbour, global stability could be in question. The end result: Stock markets may head south.

Global uncertainty has prompted funds or FIIs to look at emerging markets like India, which had shown its resilience during the previous global meltdown as there are fears now that the Euro Zone crisis could linger and the US may also see a downturn.

So, unless the world comes out of this slowdown-like situation, the glad tidings may be temporary.