Reference Auto

Fears that the US debt woes along with the European crisis could snowball into a full-fledged slowdown hasn’t died down with there being a buzz that the current crisis could be even worse than the 2008 global meltdown and this has led to the benchmark index, the Sensex, of the Bombay Stock Exchange plunging 292.84 points (1.8 per cent) to close at 15,848.83 points last Friday.

The stock markets have been under a bear grip and, with last Friday’s figures, this has been the fifth weekly drop in a row for the benchmark Sensex.

The National Stock Exchange’s 50-share Nifty also fell almost 2 per cent during weekly trade to close at 4,747.8 points last Friday.

The bourses have not only remained subdued but also highly volatile, especially last week, when the 30-scrip benchmark Sensex gained more than 2 per cent in the first two days of trading. But in the remaining part of the week, the Sensex headed south.

Like any bear market, the stock markets also witnessed intense selling pressure. Only three scrips among the Sensex stocks ended on a positive note.

They include Hero MotoCorp, which saw a rise of 2.7 per cent at Rs 1,952.45, Mahindra, up 1.2 per cent at Rs 704.65 and Infosys, which went up 0.68 per cent to Rs 2,204.55.

Among the big losers from the Sensex pack were Jaiprakash Associates, down 7.58 per cent at Rs 54.90, DLF, which slid 5.76 per cent to Rs 175.85, Tata Steel, which tanked 4.77 per cent at Rs 422.25, and RIL, which fell 4.61 per cent to Rs 719.50.

Bucking the trend somewhat, other bourses in Asia witnessed mixed fortunes. The Japanese Nikkei ended 0.29 per cent higher at 8,797.78 points, while Hong Kong’s Hang Seng closed 0.86 per cent lower at 19,582.88 points.

The Chinese Shanghai Composite index also fell 0.12 per cent to 2,612.19 points.

However, the American bourses got a boost from its apex bank with Federal Reserve chairman Ben Bernanke saying regulators would provide economic stimulus in case it is needed to bring the US on the growth path again.

The Dow Jones Industrial Average ended 1.21 per cent higher at 11,284.50 points and the S&P 500 index went up 1.51 per cent to close at 1,176.80 points on Friday.

The European crisis continued to take a toll on the region’s bourses with the French CAC 40 falling 1.01 per cent to 3,087.64 points. The German DAX slid 0.84 per cent to 5,537.48 points and the UK’s FTSE 100 closed a tad lower at 5,129.92 points.

With stock markets on a bear grip, it is time to pick some attractive scrips. But those doing so will need to have sound knowledge of the markets. Picking stocks now (at rock-bottom rates) can provide very attractive returns in the middle to long term (three to five years).

Alternatively, the Central Bank of India has launched a fixed deposit or FD scheme which offers to double your money in seven and half years.

The scheme, known as Cent Double, will give an annualised return of 13.33 per cent and is open from September 1 to December 31.

For senior citizens, the annualised return is a tad higher at 14.93 per cent where the money will double in seven years and three months.

In metro cities and urban areas, the minimum deposit is Rs 10,000 while the minimum deposit for customers in rural and semi-urban areas is Rs 5,000.

With this move, Central Bank has becomes a trendsetter, and in another few months, many banks may follow suit with various attractive (and similar) schemes.

So, in the bear market, investors who want to play it safe can opt for fixed deposits now, which could offer around 13 per cent interest for investors in the short to medium term, which is highly attractive as well as safe compared with stocks.

Now, if Narendra Modi takes the coveted Prime Minister’s seat in Delhi, one thing is for sure: The Sensex and other stock market indices would see an unprecedented surge, setting the stage for a big revival of the stock market, so much so that the Sensex could touch the 30,000-points mark by this Diwali.

The stock markets saw some pounding last week after the inflation spiralled and the Reserve Bank hiked rates to tame it. The apex bank could possibly opt for some more tightening in the near term.

The 30-stock Sensex of the Bombay Stock Exchange (BSE) closed the week at 18,395.97 points, a fall of 3.22% or 611.56 points from the previous week’s close of 19,007.53 points.

The 50-scrip Nifty of the National Stock Exchange also ended 184.35 points (3.23 per cent) lower at 5,696.5 points.

Among the Sensex stocks, five saw gains — SBI, a rise of 3.5 per cent to Rs 2,618.55; NTPC, a 1.2 per cent rise to Rs 191.80; Reliance Infra, 0.9 per cent up at Rs 724.20; Tata Steel, a rise of 0.7 per cent to Rs 635.90 and ONGC, up 0.1 per cent to Rs 1,135.60.

Some big losers from the Sensex pack were DLF, a fall of 12.2 per cent to Rs 223.10; Hindustan Unilever, down 9.5 per cent to Rs 272.45; Mahindra, a fall of 8 per cent to Rs 696.85 and Hero Honda, which saw a slide of 7.1 per cent to Rs 1,657.45.

In tune with the Sensex, the BSE mid-cap as well as the small-cap saw some hammering, ending at 4 per cent and 4.5 per cent lower respectively.

The bearish grip at the bourses prompted foreign institutional investors (FIIs) to sell stocks worth $161.6 million during the week.

The trend in the Asian stock markets was mixed. During the week, the Japanese Nikkei ended 0.84 per cent up at 10,360.34 points but the Hong Kong’s Hang Seng tanked 1.09 per cent to close at 23,617.02 points. Shanghai Composite index saw a rise of 1.38 per cent and ended at 2,752.75 points.

The US markets ended lower in the wake of the unending protests in Egypt, sparking fears that this stir could infect other regions of the Middle East and send oil prices soaring

The Dow Jones Industrial index ended 0.41 per cent lower during the week at 11,823.7 points and S&P 500 a tad lower at 1,276.34 points. Also, the Nasdaq index closed almost flat at 2,686.89 points.

The New Year has seen bears grip the Indian bourses despite world markets putting up a good show. Year-on-year, the Sensex has slid 10 per cent and some positive triggers are needed to keep the country’s bourses going.

But a good show by India Inc in the October-December quarter, especially the banking sector, could see a revival in the stock markets. But inflation, especially food inflation, will have to be kept in check for the markets to get back their buoyancy.

There is a worry though. FIIs seem to have lost faith on the bourses (for now) and a further withdrawal by these institutions cannot be ruled out. If that happens, the bourses are likely to remain in the red for some time.

The Sensex has seen a downswing to its lowest value in almost two years last week, but on Wednesday, we noticed that our bourses were in positive territory despite global markets showing a slump, which means this rally could last for the short term only.

In the near term, yes, we could witness a rally in December, which is in line with global as well as domestic trends.

It is a season where demand for every product surges in view of the impending Christmas and New Year.

Be it cars, consumer durables or even travel, everything shows a buoyancy, which could reflect on the stock markets.

During this month, global bourses are also robust and this domino effect will be felt in India.

But a few deterrents that have come to the fore are a slowdown in GDP growth forecast, which could take a toll on the job market. This could have a ripple effect, and the end result, the bourses and the benchmark index, the Sensex, could be hit.

The country’s GDP expanded only 6.9 per cent in the second quarter of 2011-12, compared with 8.4 per cent in the same period last fiscal.

On Wednesday, the Sensex ended at 16,123.46 points, up 115.12 points or 0.72 per cent. The 30-share index plummeted to an intra-day low of 15,849.57 points and high of 16,179.56 points on the same day.

The National Stock Exchange's 50-share Nifty closed at 4,832.05 points, a rise of 26.95 points or 0.56 per cent.

Major contributors to the rise were RIL, Infosys, SBI, Bajaj Auto, Bharti Airtel and car maker Maruti Suzuki as well as TCS. The oil and gas sector index has shown the highest rise during the day, surging 1.63 per cent to 8,152.63 points, followed by FMCG 1.2 per cent to 4,040.82 points and Teck, which rose 0.95 per cent.

It wouldn’t be prudent to expect too much from the markets in the next six months or so and they could move in a range-bound manner (from say 16,000 points to 18,000 points), owing to the Euro Zone crisis, which seems to be lingering.

The rupee is at an unprecedented low of 52 to a dollar (lower value of the rupee means it is at a high) and there are no signs of the Reserve Bank of India easing interest rates. Moreover, there doesn’t seem to be any respite from inflation, which, despite all measures, is hovering around the 10 per cent-mark.

Moreover, the biggest mover of our stock markets, the Sensex and the Nifty, foreign institutional investors or FIIs are doing an about turn. Overseas investors sold a net Rs 182 crore of Indian stocks just on Tuesday, hiking withdrawals from equities this year to Rs 2,810 crore.

So, with the global markets showing a great deal of uncertainty, the future (middle to long term) remains uncertain, even though in the short term the bourses may see a rise and present a selling opportunity.

The BSE Sensex’s rise to a two-month high on Friday could have been artificial after the Reserve Bank of India said it may give a break to its slew of rate hikes in its next review meeting.

The central bank had raised the repo and reverse repo rates (the rates at which the RBI lends to banks and vice-versa) and hammered down GDP growth prediction to 7.6 per cent at its recent policy review a couple of days ago.

But the RBI assurance prompted the BSE benchmark index to jump by 516 points on Friday itself, which is its highest close in eight weeks. The Sensex ended the week at 17,804.80 points.

This has brought some buoyancy back and has made investors richer by a whopping Rs 2.66 crore.

Also, the NSE Nifty moved between 5,000 points and 5,400 points before closing the week at a three-month high of 5,360.70 points.

The benchmark index’s Friday close was also its highest weekly gain in two months.

Moreover, Euro Zone’s desperate efforts in trying to contain its debt crisis gave a positive signal to global bourses, whose ripples were felt in India.

The Sensex, which slid 13 per cent this year, spurted 6 per cent during this festive week. This is its best weekly percentage gain since the first week of September.

Buying was witnessed in 12 out of the 13 sectoral stocks, which ended with sharp gains from 2.5 per cent to almost 10 per cent. Metal, realty, refinery, IT and power scrips led the surge. Only the BSE consumer durables index was gloomy and fell a tad 1.08 per cent.

In the Sensex pack, 28 out of 30 scrips ended with healthy gains but two banks – HDFC Bank and State Bank of India – ended in negative territory.

Whenever a bull run occurs, we notice that investors tend to go overboard with their optimism and, if a bear run takes place subsequently, they take time to come to terms with the gloom, resulting in them losing crores.

Now, for the past three-four years, the Sensex has been hovering around the 16,000 points-20,000 points mark and this is definitely not a good signal for long-term investors of stocks as well as mutual funds and ELSS investors.

What the Sensex now needs is a new medium to long term trigger, so that it remains above the 20,000 points mark and hovers around a higher range. But that really doesn’t seem to be happening in the near term.

Inflation for the week surged to a six-month high of 11.4 per cent, owing to a rise in vegetable prices. This could prove to be a worry for the stock markets and drag down the bourses if it persists.

So, will it be easy for the Sensex to break the 17,000 points-20,000 points barrier under the current circumstances, with the Europe crisis as well monster inflation still there and are we seeing a new bubble prompting the Sensex to rise artificially in the short term?

The stock markets are at a new high, and this time, it seems that the rally could be sustainable. The Sensex has gone above the 19,400-points mark and foreign direct investment or FDI push in Parliament (both in the Lok and Rajya Sabha) would probably ring in the second phase of India’s reforms.

Though the Bahujan Samaj Party of Mayawati and Samajwadi Party of Mulayam showed their reluctance, there was a tacit understanding with the Congress to pass the reforms Bill (FDI Bill in retail, that is) in the two Houses of Parliament.

Remember the 1990s, when economic reforms got its first push. As a result today, all kinds of foreign brands are at our doorstep. Be it Coke or Pepsi, Kentucky Fried Chicken or even Adidas, Puma or Nike for that matter. As a result of reforms, today we have numerous malls across the country, which is a shopper’s (as well as a window shopper’s) paradise.

This is what the first phase of reforms has done to us. Now, what can we expect from the second phase?

We will have a wider choice of apparel brands and we can expect every food company in the world to be in India (like Starbucks Coffee, among others) and see the entry of a litany of latest electronic gadgets, and get them all for a bargain.

We will see global giants like Wal-mart, and with their entry, companies like Reliance Retail, Pantaloons, Big Bazaar and Westside may have to make way for their bigger cousins or have to tie up with them in order to stay afloat.

Small or kirana stores would bear the brunt of this, but with FDI in retail, the supply chain infrastructure in the country would see a sea change and get a tech boost.

Coming back to the stock markets, we could see the Sensex touching the 20,000 points-mark this year itself and this could be ushering in glad tidings for the next year.

And for those who invested in mutual funds in February (when the Sensex was around 17,000 points), could wait for may be a year, till December 2013, when there is possibility that the Sensex would scale the 22.000-23,000 points-mark.

If this happens, the gain could be over 50 per cent. After FDI in retail was okayed by Parliament, one thing was almost certain: The move would give a permanent succour to the stock markets.

But if myriad political parties hog the limelight, it could spell disaster for the bourses.

If the 2014 election sees an indecisive India (with factional parties ruling the roost), the stock markets could witness permanent damage (at least for the next four years).

But if there is political stability, the stock market will surely head northwards and investors can start picking up some lucrative stocks from now.

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.

The week started on a bad note for the markets and the BSE Sensex plummeted to its lowest in two months, plunging by 2 per cent, and there doesn’t seem to be a cure for the stagnating effect of the markets on mutual funds, whose golden days seem to be over.

The biggest sufferers have been equity and tax-saving mutual fund owners.

The Sensex has been moving in a range-bound manner in the last four to five years with the highest being around 21,000 points and the lowest 16,000 points.

Of course, during the global downturn in 2008, it plunged to less than 8,000 points. (Those who invested in funds then got almost double the amount in just two years).

So, a mutual fund subscriber, who has invested in a scheme, say four years ago, will probably not get an interest of more than 10 per cent (that is, on the best performing ones).

The scenario was diametrically opposite during the 2001-2007 period. In 2001, the Sensex’s lowest was around 2,500 points. In 2007, the Sensex peaked to over 20,000 points. That is, almost eight times!

So investors, who held good stocks in 2001 to 2007, raked in the moolah in a big way.

Moreover, even mutual fund investors saw cash registers ring. People who astutely picked funds in 2001 were able to sell them for almost 10 times the amount in 2007.

For instance, if someone invested Rs 1 lakh in 2001 in funds like Birla Mutual Fund tax scheme, he would have made a neat Rs 10 lakh in 2007. But if he held it for even a couple of years more, he would have got say Rs 7 to 8 lakh.

So, it must be baffling. How come someone who invested Rs 1 lakh gets Rs 10 lakh in 2007, and may be Rs 7 lakh in 2010?

That’s because mutual funds move proportionately with indices like the Sensex. From 2002 to 2007, the Sensex rose eight times. So, the returns from funds were also more.

But from 2000 to 2010 (which is a longer period), the Sensex moved up from 3,500 points to 20,000 points, which is six times higher. Despite being a longer period, return from mutual funds was less.

But these returns are a distant dream now, and despite mutual fund firms and their agents trying to give a fillip to schemes, it is unlikely that one will make even one fifth of the earnings made in 2001-2007.

So, the golden days for mutual funds seem to be over unless we see the Sensex (which is hovering around the 17,000 points-mark for almost a year) rebound like never before and surpass the 35,000 points-mark at least but that does not seem likely even in the medium term.

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.

So, gold prices have scaled to Rs 32,000 for 10 grams and this is attracting many towards the yellow metal, as people think that the price of this precious metal could go up and up only, even in the long term (unlike stocks). Therefore, is it a good investment option in the medium as well as the long term?

The story of gold is similar to that of the stock market. Between 2001 and 2012, the stock market has seen a phenomenal rise.

It has been heading north (steeply) towards the first part of the decade but the northward journey has been arrested, and since the last three years, the Sensex, which is the stock market index of the top 30 stocks, has seen a fall.

The Sensex movement has been quite stunning. In 2000, it was in the range of 4,000 points and the year after, it fell to a range of 3,500 points.

It stayed that way in 2003 and in the next year, it surpassed 6,000 points. In 2005, it touched 6,600 points and in 2006 it scaled a whopping 3,000 points to 9,600 points.

The next two years were unprecedented. The Sensex touched 14,000 points in 2007 and in 2008 it skyrocketed to over 20,000 points.

But the slowdown of 2008 dragged the Sensex down to 7,700 points and in 2010 it touched 17,000 points. It has remained that way till date.

So, now there is speculation that the stock market has reached a point of saturation and the Sensex’s rise could be very gradual or slow. And, if it surpasses the 20,000 points-mark this year, it could bring in glad tidings.

So, basically the juice in the stock markets has just gone.

In contrast, the bullion or gold and silver markets are still giving a glimmer of hope to investors.

Gold prices were around Rs 8,000 per 10 gram in 2000 and today it is Rs 32,000, which is four times. But in contrast, the stock market has risen by over six times in that period.

So, why would the gold and silver markets go from strength to strength?

Traditionally, Indian families have been buying gold or silver to stock up ahead of the wedding of their children. That is, gold (and silver) is considered as the most precious gift (or dowry) in most traditional families in India during weddings even today.

Consumption of gold and silver in India is highest in the world as almost every family doles out these precious metals during marriage. And, this is unlikely to come down at least in the next generation. So, as the demand for gold and silver soar, the prices will move in tandem also.

Therefore, the value of gold and silver will keep on rising even if it means a slower growth and the gold investor (who buys hallmarked gold biscuits from reputed banks or shops but not jewellery) will see prices heading north and can surely keep it as an investment option even in the long term, unlike stocks.

The Bombay Stock Exchange (BSE) Sensex has risen to a two-month high touching the 17,000-mark again, and despite the year-end letdowns (in 2011), this has given a glimmer of hope to investors after quite a while.

If there are sustainable positive cues, we could see the benchmark index surpass 23,000 points by the year-end.

With the Reserve Bank lowering the cash reserve ratio, it feebly indicates that buoyancy in the stock markets will be back in the days ahead.

So, what happens when ratios and rates are reduced? When ratios and key rates like the repo rate (the rate at which the Reserve Bank lends to other banks) and the reverse repo rate (the rate at which other banks lend to the RBI) are reduced, then more money is available in the monetary system.

This will result in more cash flow and more money will be put into the stock markets. Overall, this will bring a positive outcome into the bourses. It also indicates that the economy could be back on the path of growth.

Growth and investment perception could see a revival with the RBI move in the next few quarters prompting auto, bank and capital goods stocks to outperform the markets.

Therefore, with the Reserve Bank moving in tandem with the stock market, this is a positive sign at least in the near to medium term.

With the Sensex rise on Wednesday, we saw Infosys and Tata Motors propel the markets as investors resorted to buying.

On Wednesday, the bellwether index, 30-share BSE index, ended 81.4 points higher at 17,077.18, its highest closing level since November 14.

Eighteen of the 30 Sensex stocks closed in the green on Wednesday. The 50-share NSE Nifty index went up 0.6 per cent to 5,158.30 points.

During the month, the Sensex has seen an almost 10 per cent rise. So, those investing in heavyweight Sensex stocks or equity mutual funds could have earned an interest of about 10 per cent in just a month (which is more that what a bank fixed deposit investor earns in a year).

The benchmark index has gained 10 per cent so far this month, with foreign investors lapping up shares worth over $1 billion. The index fell nearly a fourth during last year as foreign institutional investors or FIIs pulled out over $500 million as rate increases by the RBI took a toll on economic growth.

Worldwide, despite the gloom, European markets are looking to India while the Asian bourses are likely to tread cautiously.

So the Reserve Bank, with its latest rate cut, has paved the way for fresh impetus to the stock markets and if such a push is strong enough, could we see the Sensex surpass the 23,000 points-mark by this year-end?

So, will the BSE Sensex slide below the 15,000 points mark again? It seems so as far as the trend in the last one month is anything to go by.

The Sensex began higher (last week) at 17,015.99 points but later fell below 16,000 points to 15,987.77 points and ended at 16,141.67 points, a fall of 697.96 points or 4.14 per cent, from the previous week’s close.

The NSE 50-share Nifty also plunged 227.30 points to end last week at an over one-year-three-month low (at 4,845 points).

But if lessons are to be learnt from the previous global meltdown, FIIs should bet on India and emerging markets like China and Brazil rather than countries in the West like the US.

For instance, India almost remained impervious to the global meltdown of 2008 even though we saw some jobs being lost, and this time also, India has resisted this initial jolt (after the US downgrade).

The recent economic data, which was released by the US, paints a gloomy picture on the prospects of the global economy in the medium term and even Europe is set to sink in this crisis.

The domestic scenario isn’t too good either. Surging inflation and interest rates have taken a toll on the market as fears loomed that corporate profits could be dented.

So, with the upcoming festive season, there could be a temporary revival, and the Sensex could turn robust and scale the 18,500 points mark.

But with the overall gloom in the global markets remaining, the stock markets aren’t going to do too well this year end.

The BSE Small-cap index was the biggest loser among indices last weekend, sliding 8.09 per cent. The Mid-cap fell 5.93 per cent.

Selling was witnessed in all sectors, with indices tanking between 0.25 per cent and 7 per cent. IT firms have been dented heavily owing to the US crisis.

Even slump in the real estate sector continued owing to the Greater Noida crisis, where farmers are seeking their land back from the Noida Development Authority.

The farmers had handed over their land to the authority, which, in turn, sold the plots to builders to make high rises. Here, the fate of 50,000 home buyers is at stake.

This could have a domino effect on the entire country, if such a revolt is replicated elsewhere. Also, bank and auto stocks were hit.

Sensex stocks like RIL, Infosys, SBI, Tata Motors, ICICI Bank, Tata Steel, Jindal Steel, Sterlite, Wipro, Hindalco and Tata Power fell to their 52-week lows. But as they are scrips of rock-solid companies, these stocks are the ideal buys now.

Now, if you plan to sell stocks and hope to make a handsome profit, you may have to wait till the Union Budget or the last quarter of the financial year (around February-March 2012) as the government may try to roll out a popular Budget in a bid to avoid a drubbing in the forthcoming Lok Sabha elections.

But if a full-blown crisis (like the 2008 meltdown) occurs, the wait (to sell stocks) could even be longer and the Sensex may fall well below the 15,000 points mark in such a scenario.

After two weeks of losses, the country’s bourses turned bullish in the wake of a buying spree by domestic funds in some financial stocks but the Reserve Bank of India’s (RBI) rate hike next week could drag them down again.

Last week, the Sensex, the benchmark index of the Bombay Stock Exchange (BSE), ended at 19,007.53 points, up 147.09 points from the previous week’s close of 18,860.44 points.

On Friday, the last trading day of the week, the benchmark index closed 39.01 points or 0.2 per cent lower at 19,007.53 points in a somewhat dull trading. The 50-scrip Nifty of the National Stock Exchange ended 15.1 points or 0.26 per cent down at 5,696.5 points.

But next week, the stock markets are likely to remain subdued as the Reserve Bank is set to raise interest rates in an aggressive bid to tame inflation during its policy review on Tuesday. The apex bank’s move is likely to suck out a substantial amount of money from the country’s financial system.

With the inflation scaling 8.43 per cent in December 2010 (against 7.48 per cent in November 2010), the market hopes the RBI will hike key policy rates by 25 bps and the apex bank could end the year with a cumulative hike of 100 bps (for the entire 2011).

On Friday, the BSE mid-cap index ended 0.22 per cent higher while the BSE small-cap index saw a rise of 0.46 per cent. Large-cap stocks also saw a gain.

Stocks that helped the Sensex move up were Reliance Infrastructure, which saw a rise of 2.81 per cent to Rs.737.10. State Bank of India went up 2.49 per cent to Rs 2,597.95 while Reliance Communications was up 2.14 per cent at Rs 136.10 and BHEL shares rose 1.75 per cent to Rs 2,217.50.

Among the main losers in the Sensex pack were Wipro, which shed 4.59 per cent to Rs 456.05, ONGC scrip fell 2.57 per cent to Rs 1,105.05 even as ITC was down 1.63 per cent to Rs 168.95.

The scenario in the remaining parts of Asia was somewhat mixed on Friday with fears that China may put a noose on its monetary system in the next few weeks. But China’s bourses remained firm. The Chinese Shanghai Composite index went up 1.41 per cent to close at 2,715.29 points.

Among other Asian bourses, Hong Kong’s Hang Seng fell 0.53 per cent to end at 23,876.86 points and Japan’s Nikkei ended 1.56 per cent lower at 10,274.52 points.

On Friday, the US markets also saw mixed response. While the Dow Jones Industrial index ended 0.41 per cent higher at 11,871.80 points, the Nasdaq index tanked 0.55 per cent at 2,689.54 points.

So, where is India’s share market headed from here? Notwithstanding the ups and downs on the bourses, we have some robust data: The Centre for Monitoring Indian Economy (CMIE) recently revised (upwards) growth forecast to 9.2 per cent for the whole year.

CMIE added that performance of other segments of the services sector like finance, insurance and realty will also turn buoyant owing to strong credit off-take.

There is an impediment though. Burgeoning food inflation along with headline inflation, which has led to a surge in prices of vegetables like onions, could be of some concern.

If the government is able to tame inflation, then it could be possible for the Sensex to touch its projected figure of 25,000. But if inflation turns out to be a monster and the Centre throws up its hands in despair, then the markets could face a bumpy road ahead.

The stock markets are somewhat subdued now and this trend is likely to remain for the entire summer and only an unprecedented event could bring in positive or negative trigger to the Sensex and the markets.

As we said earlier, this is an opportunity to put in money for the medium to long term (three to five years) as India’s economic outlook looks robust with a high GDP growth rate predicted.

But investors would be prudent to stay away from stocks of companies that are in to or planning to enter the nuclear power sector as the government is likely to go for a rethink (owing to the nuclear reactor leak in Japan, following the tsunami) before granting permission to set up nuclear plants in the country.

The country’s markets and the economy had largely been impervious to the global slowdown of 2008 and this has prompted foreign institutional investors to think that the Indian bourses are safe to invest in.

Currently, the picture is rather gloomy. The BSE benchmark index, the Sensex, declined last week for the second week in a row, falling 15 per cent as there were fears that gas output from Reliance Industries may drop 12 per cent.

The 30-share BSE index slid 14.9 per cent or 271.06 points during last week to end at 17,878.81 with 28 of the 30 stocks in the Sensex pack suffering losses.

Reliance has said output from the D1 and D3 fields in the Krishna-Godavari basin KG-D6 block could slip to 38 million standard cubic metres per day (mscmd) in 2012-13 from 42-43 mscmd now.

This news has dented the Reliance Industries stock, which ended 3.7 per cent lower at Rs 993, the lowest in about 11 months.

Also, the Reserve Bank of India raised key interest rates in its latest policy review and this slowed down the markets.

According to dealers, the bourses are likely to trade in a narrow band till the fourth quarter results are announced next month.

A key political factor also hit the markets. New allegations of cash-for-vote during the 2008 trust vote came as another hindrance factor.

Moreover, the tremors of Japan’s earthquake-cum-tsunami linger with investors deciding to play it safe. Also, the unending crisis in West Asia and North Africa (that is, in Libya, Bahrain and other neighbouring nations) is also slowing down the stock markets.

It was widely perceived among market men that the Sensex could scale to nearly 25,000 points by the end of this year. But with the Middle East crisis sparking fears of surging oil prices and with a catastrophe striking Japan, the target is now becoming all the more difficult to achieve.

Even though the Central government has been cornered on two fronts — rampant corruption in awarding of 2G licences and escalation of vegetable prices, the general perception this year is that the government will present a people-friendly Budget, which has probably led to positive sentiment in the country’s markets.

This has resulted in the Sensex snapping weekly losses last week after falling for three consecutive weeks. However, last week inflation as well as food inflation saw some moderation.

Not that the negative sentiment around the world has died down. Protests in Egypt led to ouster of president Hosni Mubarak and the agitation has spread like wild fire to nearby countries such as Libya, where the country’s leader Gaddafi defied protests and handed over power to his son.

Gaddafi is believed to have fled the country. Also, there is an uprising taking place in Bahrain that is threatening to be a rerun of Egypt. Protests have also been reported from Morocco.

Meanwhile, the Sensex of the Bombay Stock Exchange closed the week at 18,211.52 points, a rise of 2.72 per cent or 482.91 points from the previous week’s closing figure of 17,728.61 points.

During the previous three weeks, the Sensex had shed 1,279 points. But last Friday, key indices fell sharply owing to profit booking. The benchmark Sensex fell 1.6 per cent to end at 18,564.08 points on Friday.

The 50-share Nifty of the National Stock Exchange ended the week at 5,458.95 points, a rise of 145.9 points or 2.8 per cent from the previous week’s close of 5,313.05 points.

Food inflation slid to 11.05 per cent for the week ended February 5 after it fell nearly four percentage points to 13.07 per cent in the previous week.

Inflation (on wholesale prices) also cooled to 8.23 per cent in January against 8.43 per cent last month.

The figures have come as a breather for the government which has been trying out various ways to tighten monetary policy and crack down on hoarders to check inflation.

Union finance minister Pranab Mukherjee hoped the prices would moderate further and food inflation would come down to single digits before March.

On Friday, major gainers on the 30-scrip Sensex include Hindustan Unilever, a rise of 1.99 per cent at Rs 279.25; Jindal Steel, which saw a surge of 1.55 per cent to Rs 679.40; Cipla, up 0.57 per cent to Rs 307.30 and Bhel up 0.56 per cent to Rs 2,093.15.

Losers on the Sensex pack were Reliance Communications, which saw a slide of 6.8 per cent at Rs 93.15. Reliance Infra was down 5.6 per cent at Rs 605.60. Jaiprakash Associates saw a fall of 5.54 per cent at Rs 85.25 and Tata Motors was down 3.91 per cent to Rs 1,201.95.

Asian markets saw mixed response with the political tensions in West Asia continuing to dent the bourses. Hong Kong's Hang Seng ended 1.26 per cent higher at 23,595.24 points, while the Shanghai Composite index tanked 0.93 per cent to close at 2,899.79 points. The Japanese Nikkei ended flat.

There is a strong belief that Pranab Mukherjee will provide adequate tax relief to the middle class, among many people-friendly measures in the Union Budget, and this could act as a positive trigger for the markets.  

The Sensex, the benchmark index of the Bombay Stock Exchange (BSE), has hit a standstill in the last few years, hovering around 16,000-18,000 points and with fear of another impending slowdown, the stock markets could plunge to the lows of the 2008 slowdown and the Sensex may again fall below the 10,000-points mark.

Fitch, a globally-reputed rating agency, has downgraded India from stable to negative and said that unless the country speeded up on economic reforms, the prospects in the days ahead were bleak.

So, what does a Fitch rating do to a country’s reputation? It makes it difficult for a country to procure loan from the global market if the rating is negative.

Also, the Reserve Bank, in its quarterly review, left key rates unchanged, which indicate interest charged by banks were unlikely to go up in the near term.

On Monday, the Sensex ended 244 points lower at 16,706 points, with sector sensitive to interest rate changes such as banking and real estate stocks plunging the most.

The day’s losses left stock investors poorer by Rs 78,000 crore with BSE's market capitalization standing at Rs 58.8 lakh crore.

With the rupee also plummeting to its lowest value (touching almost Rs 55 to a dollar), it is a worrying signal as foreign products would become dearer.

Marketmen are of the opinion that the Union government isn’t doing enough to give a fillip to the stock market as well as the economy. The want the government to put reforms (especially FDI in retail) in the fast lane.

Despite all this gloom, there could be light at the end of the tunnel. In case, the Sensex goes below the 10,000-points mark, there will apparently be gloom everywhere and people will shun stocks and lucrative mutual funds.

In fact, they should just be doing the opposite: picking up stocks, preferably of reputed large-cap companies (after a thorough analysis though) and mutual funds rated five star (over a five-year period at least, which indicates consistency of returns in the long term) by Value Research.

One advantage of course is that these stocks and mutual funds could double in value once there is another boom, which may take a year or two.

There is also another advantage. Unlike fixed deposits of banks or even post office instruments like NSCs, among others, (which offer assured returns and therefore attract tax), income from a normal mutual fund after a year or from a tax-saving fund (better known as ELSS) after three years is entirely tax free as they offer uncertain returns.

So, investing in mutual funds or stocks during a slowdown is the most judicious thing to do.

Despite the gloom, it seems the benchmark stock market index, the Sensex, could scale beyond the 20,000 points mark by the end of the year.

Even as the festive season sales as well as demand have just started picking up, the benchmark Sensex has been hovering around the 17,000 points mark and many may argue that reaching 3,000 points more could turn out to be an arduous task.

The markets are very choppy (that is, highly volatile) and if it remains so, the bourses could jump, taking only a few trading sessions for the Sensex to touch the 20,000 points mark, like earlier.

Last week ended Friday, the benchmark index had given a glimmer of hope when it wiped out its early losses and ended nearly 67 points higher at 16,933.83 points, extending gains for the third week.

The bourses began the week on a bearish note in the wake of a feeling of worry across global markets as the Euro Zone crisis continues to linger.

What added to the woes of the stock markets was the depressing economic data, which hammered down the Sensex by 2.15 per cent or 315 points on the start of last week, that is, Monday.

The sluggish figures also forced the Sensex to its two-week low of 16,374.68 points on Tuesday.

The Bombay Stock Exchange 30-share index traded on a positive note in the remaining part of the week and rose to 17,122.54 points before ending at 16,933.83 points.

Fears over the Euro Zone crisis, it seems, will not be gone for a while.

In fact, the crisis aggravated after European Central Bank’s chief put in his papers owing to differences with the bank’s leadership.

This has brought in a sinking feeling among the global bourses and this sluggishness is likely to stay in the short term.

With the US already being downgraded, there are fears that rating agency Moody’s axe may fall next on French banks as they have bet (invested) substantially on Greece.

If France is downgraded, it would be a major blow to not only Europe but the entire world and Indian bourses could witness a slipper journey, at least in the short term.

The domestic scenario is also full of gloom. The index for industrial production or IIP, or in other words, a measure of industrial output, grew at a slow 3.3 per cent.

During the same period of the previous year, this figure was at a whopping 10 per cent.

This means that the manufacturing sector has been performing abysmally, owing to slow demand.

The later part of the week saw a demand for infotech stocks, which resulted in a sharp rally, prompting the Sensex to end on a positive note.

But the latest rate hike by the Reserve Bank of India will further slow demand for cars and homes as prospective buyers will shy away from taking loans.

The Reserve Bank has been on a rate hike spree for quite a while to tame inflation but that hasn’t happened yet.

But the end of the week rally as well as the forthcoming festive season may spur the markets and help the Sensex gain 3,000 points more to end at over 20,000 points by the end of the year and this could help see some of your stocks in the Sensex pack such as Reliance Industries, TCS, or even ONGC, gain over 20-30 per cent within three months, that is, by December-end.