Market Outlook 22nd October

Oct 21, 2013 No Comments by

Nifty traded in a very narrow range of 30 points today. It went to 6175 levels then back to 6200 levels. After such a big rally this kind of consolidation was expected. L&T came out with its numbers and surprised everyone with better than expected results. Now L&T is a fantastic company fundamentally. No doubt about that but when i see the result it is amazing what the markets are cheering. The net profit year on year is down 14% to Rs 978 crore. Markets were expecting it to be Rs 970 crore so they gave a thumbs up to it. If we see closely then actually the company is performing bad. Its profit has decreased with 46% of revenue coming from overseas and other income ( dividend from its subsidiaries). The real core domestic business is struggling and that is not a good sign.

Most of the companies have reported better than expected result. But most of these companies are export oriented like TCS, Infy or Reliance. Reliance’s 66% revenue came from export. So, on back of rupee depreciation these have reported better numbers. If we pick any company we can clearly see that the domestic business has seen a dramatic slowdown which is not a good sign for the company. The IT pack has seen deep correction today because the initial optimism due to the result is fading out. Same will happen with other companies. One more reason of concern is the decreasing margins. Yes the profit has increased but the margins have decreased.

Now, i am neither a bear nor a bull. I just rely on facts and figures. The markets can rally to any levels or fall to any levels but that has to be justified by facts. If the same Nifty was trading at 5200 levels i would say that it is undervalued and people should be buying stocks. But that is not the case right now. Nifty is trading near its all time high but the facts are not supporting it. Its very common to see analysts coming on tv channels and at this point telling that Nifty might go to 6300,6400 or 6500. These are the same analysts who a month back were saying that Nifty should go to 5200. So, my simple advice is to not get lured by such talks. Until and unless such optimism is justified by growth data i am not going to say that Nifty will touch such high levels. I may be proved wrong because the markets decide their own course.

With the US debt ceiling issue out of the way, the global news front has gone silent. All global markets are expected to trade sideways for some days. So, the domestic cues of each market will be in focus. At this point a profit booking correction looks very likely. So, all investors going long keep this in mind. As for value picking, most stocks are over valued now. So, be cautious in picking them. Just be cautious and sit high on cash. Markets are forever. If you missed this opportunity there definitely will be many more. Don’t get carried away.

 

 

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