Markets: No signs of revival

Deepak Singh Tanwar

With the deadline of July 2 approaching, the trading volume have shown a further drop. Not only are the volumes down, but prices have also been on a decline and the trend is showing no signs of revival. With a proposed change in the market system, and stocks at lower levels, should investors take a plunge and go on a shopping spree?

If one were to go by market sentiment, the answer is a clear no. The sentiment has taken a sharp beating despite a continuous pumping of funds by the FIIs. This indicates that the selling side is much more stronger than the buying and as a result of that prices have been heading southward.

The signals from the US markets are not very encouraging either as domestic IT stocks reflect trends on Nasdaq. After a corrective move, the Nasdaq too is showing signs of weakness and may find it difficult to sustain at the current levels. This will have some negative impact on performance of domestic IT stocks which appear to be the weakest sector as far as market prices are concerned.

Barring few counters like Wipro and Digital Equipment, the performance of other top IT stocks is far from impressive. Infact, counters like SSi, Global Tele, HFCL, DSQ Soft, Pentamedia, Silverline, Satyam Comp and Zee Tele appear extremely weak and a further fall will not bring a major surprise. As for old economy, which managed to perform reasonably satisfactorily till now has also shown signs of weakness.

The stocks from the cement sector, which gave good returns in recent months, have also come under pressure. While the rumours of cartel-breaking may have triggered this selling but monsoon is anyway a dull period for this sector. For this reason, while the fall may not be significant in cement counters in the coming months, chances of an uptrend are dismal.

As for other sectors like textile and MNC pharma, the market has remained immune till now and unlikely to give good discounting in the medium-term. The companies, which are in action are from the media industry and will continue to generate interest. Few domestic pharma companies like Cipla and Dr Reddy’s have also done well and the outlook continues to remain positive for them. Few bank stocks like Corp Bank, Bank of India also appear on a good wicket.

While the buy back game is on, the market has factored in a large number of cases. One needs to do a lot of homework and has to be lucky to catch the right buy-back candidates. For all these reasons, those planning to do purchasing at the current levels, can wait for some time. Even those who believe in bottom-fishing may also get prices at these levels. Caution is the right word.

(The analyst does not hold any position in the stocks mentioned in the article)