Equity Market Correction: Anto’s Guide
When BSE Index rallied past 21000 Index the entire investment community was looking for a sharp rally past 25000 Index by March 2008. This is called total optimism. The stock market crashed from 21500 level to around 15500 level in a matter of 5 months. Currently every one is looking for the market to crash from the current level of 15500 to around 12000 index in BSE. This is called total pessimism. No one in the market is looking for a rally in the stock market on account of the following
High crude oil price (USD 140)
Expecting double digit inflation in the 3rd week of June
Unstable global market
High commodity price
Sharp depreciation of rupee against the USD
Heavy FII selling
Resulting in total negative sentiment
Last Friday US market Dow Jones fell by 400 points and NASDAQ fell by 75 points due to higher than expected unemployment report of 5.5% way ahead of market expectation and crude oil price jumped by 10 $ in a single day and closed at a record high of 139 $. We can expect the entire Asian market to open gap down Monday morning. We can expect the Indian market to open gap down by at least 300 points. We see the Indian BSE index can fall anywhere between 500 to 1000 points in the current week. This will be the last leg of the current stock market crash in India. We expect the Indian stock market to bottom out this month.
We see a favourable stock market in India in the coming months on account of the following
Crude oil price to come back to a reasonable level(100 $ and below) after the blow out rally
Inflation to come down to a manageable level of 6.5% and below (fiscal & monetary measure on one side and a good monsoon to bring down the prices on the other side)
Stable US and European market
Commodity prices to come down on account of stronger dollar and a stable US economy
Rupee to stabilise at a reasonable level
Smarter FII to do bottom fishing
Resulting in total positive sentiment
We see a value emerging in many stocks and sectors. Banking and reality sectors were totally battered due to higher inflation and fear of increase in Interest rate by RBI. We see this as a great opportunity for long term investors to pick up goods stocks.
We recommend the following stocks to be bought during the sharp fall tomorrow for a short term bet
Cairn Energy
Sesa Goa
Infosys
Aban Off Shore
Long term investors can use this opportunity of sharp fall on Monday to buy the following shares for a one year holding period
Sesa Goa below Rs.3500
DLF around Rs.475
Unitec around Rs.175
ICICI Bank around Rs.700
Kotak bank around Rs.600
Union Bank around Rs.115
Bank of Baroda around Rs.225
Jaiprakash associates around Rs.180
Punj Lloyd below Rs.250
L&T around Rs.2500
Infosys around Rs.1800
Tech mahindra around Rs.780
RPL around Rs.155
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