Short-term volatility to persist, say experts

Written by Markets Bureau | Research Bureau | Mumbai, Sep 29 | Updated: Sep 30 2008, 05:55am hrs
With the market getting extremely turbulent and global uncertainty causing the markets to touch a new low has got investors more than concerned. And why not, the market, since January 1 2008, has seen wealth amounting to Rs 31.76 lakh crore being wiped out. And on Monday when the Sensex tanked by 506.43 points, around Rs 1.68 lakh crore was wiped out.

Answering to a query posed by FE, investment guru Marc Faber said succinctly, I think market will move below 10,000 on the Sensex and that he would wait to invest.

In the short run, volatility is expected to persist and there will be more testing times ahead, says Bharat Shah, of ASK Investment Managers. He, like many others reckon that the bottom might not be formed yet, but in the long run there is nothing wrong with the fundamentals. Ved Prakash Chaturvedi, CEO, Tata Mutual Fund adds, The FIIs selling pressure is responsible for the volatility in the domestic market which may likely to continue for the next six months.

With commodity prices correcting, oil prices cooling off, there are more things that are going good for India at the moment, reckons Shah. Anup Baghi, executive director of ICICI Securities believes that the market has created a strong bottom at the 12,500 levels. Though this could also be tested as there are few participants in the market at the moment, he feels. The FIIs have been net sellers and the institutions, like mutual funds are sitting tight and the insurance companies have been investing the same quantum as they had in the previous year.

As regards the retail investors, with fixed maturity plans offering 11.5% returns, many are now heading in that direction, reasons Bagchi. He also reasons that this looks to be a very safe move as the 11.5% returns at 12,500 levels means that the investor is hedged till the Sensex reaches 14,000 levels. They will get the same returns when they enter into an FMP, so they incentive is more skewed towards this area. At least there is a greater certainty of getting returns here, he adds.

However, for investors who are prepared to take a longer term view, this could actually be a time for picking up stocks at a bargain. And, cost averaging, that is buying a specific amount of stocks, despite the price change, could be a strong way to beat volatility. Here, Edelweiss Securities recommends a cautious approach.