Reference Auto

Well, the country’s economic parameters don’t look good and the stock markets are now headed for another bear phase after a three-week rise, with fears of lower industrial output and European debt crisis casting a shadow on the bourses.

Also, row over the US debt ceiling and the Mumbai serial blasts led to the bearish sentiment on the market, even though the bourses showed resilience on the day of the blasts and headed north.

The Sensex tanked 296 points due to profit-booking last week, ending at 18,326.42 points.

Also, start of the first quarter results have not been encouraging, with Infosys performing below Dalal Street’s expectations, although the company reported an almost 16 per cent jump in revenues at Rs 1,722 crore.

One of the major concerns is the tardy pace of the economy, which could take a toll on the bourses and clip upward movement of benchmark indices like the Sensex and the Nifty of the National Stock Exchange.

Industrial growth plummeted to 5.6 per cent in May 2011 compared with 8.5 per cent in the same month in the previous year, primarily on the back of poor show by the manufacturing as well as the mining sectors, which added to the woes of the bourses.

The BSE Sensex began last week lower at 18,823.19 points and slipped to 18,326.42 points before closing the week at 18,561.92 points, a loss of 1.57 per cent from its previous weekend level. The index had gained 987.51 points or 5.53 per cent in the previous three weeks.

The NSE’s 50-share Nifty also fell 79.55 points or 1.41 per cent last week to 5,581.10 points from the previous week’s close.

Owing to the recent rate hike by the Reserve Bank, sectors that are mostly affected by rate changes, mainly the banking and real estate sectors, saw stocks being hit.

The rising interest rates may slow down demand for loans (a concern for banks) and houses (a major concern for the real estate sector) and this may dent the profits and sales of companies in these two sectors and stocks may nosedive.

So, here’s an opportunity. Picking up stocks meticulously in these sectors could prove to be boon for investors in the medium to long term.

Like last week, looming fears of the ministerial panel giving green light to the draft Mining Bill, which proposes profit-sharing with project-affected people, took a toll on mining and metal majors again.

Among the indices that slid was the BSE-IT, which fell by 5.53 per cent. The BSE-Teck slid by 4.51 per cent, the BSE-Metal went down by 2.36 per cent, the BSE-Realty tanked 1.89 per cent, the BSE-Capital Goods by 1.35 per cent and the BSE-Auto by 1.19 per cent. 

Among the losers in the Sensex-30 stocks were Infosys, down 8.31 per cent while Hindalco fell 6.26 per cent, Hero Honda by 3.76 per cent, Wipro by 3.63 per cent, Tata Steel fell 3.56 per cent and Bhel by 3.02 per cent.

However, Reliance Industries rose 2.21 per cent, along with ONGC by 0.71 per cent, ITC by 0.52 per cent and Mahindra by 0.28 per cent.

As bears dominate the market, we may have to wait till the festive season for another possible bull run in the markets, and at this rate, it will be an achievement if the Sensex achieves a modest target of 21,000 points by the year end.