ithought market wrap 38, 12 July 2011

Quick Edit: Confidence seems to be a scarce commodity these days. Markets are fueled constantly by confidence and its ebbing level is clearly hurting sentiment. The return of confidence is also unlikely to happen anytime soon. Events tend to trigger sharp loss of confidence like the US downgrade did last weekend and comebacks are painfully slow. The prolonged period of uncertainty is likely to test the patience and resilience of investors. When stocks stay in a range, it is a good time to identify companies you want to own and to accumulate them gradually. Sudden market dips must be used by investors to buy stocks cheap. Capital must be moved out of safe havens into the stock markets as stocks become relatively cheaper than other asset classes. The markets may be in snail mode. But, investors must not sleep while opportunity knocks.

Impact:

When the FII’s sell stocks, they actually dump them. The week that was has been marked by persistent dumping by the FII’s. Domestic mutual funds bought steadily to absorb the selling and that has helped the markets to fall less. The results season ends this weekend and the Indian markets will now mostly react to global factors and fund flows. The volatility of the global markets will definitely impact our markets in the near term. Investors seem to be back to tracking the global indices and their futures by the hour. Sentiment seems to mirror the global mood and contrarians are fewer and that are very selective in their approach. Gold has been hitting newer highs every other day and frenzy seems to be building up around the metal. The next few weeks will be crucial for oil and commodity prices and any further fall will give domestic inflation much needed relief.

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