NSE touched 5000 pts today and BSE is in striking distrance of 17000. Many may wonder why is markets frenzy so crazy. Many investors 'feel' the markets are in excess and it has rallied beyond a point. Let us clarify the facts and figures.
In the first place, stock market rally usually preceeds market news by a few months. As a result we saw the markets pick up momentum as early as April 2009 and the rally is continuing.
When fundamentals are good, investors ( particularly FII's ) pour money. As a result markets spurt in a short span of time.
The current market rally is 'supported' by such fundamental : one such being higher advance tax payments, which indicates recovery in business and profits of corporate companies.
For instance,
State Bank of India paid 71.5% higher advance tax at Rs 1,832 crore compared with the corresponding period last year.
TCS has paid 315% higher advance tax at Rs 220 crore in the second installment. Mahindra & Mahindra has paid 540% higher advance tax at Rs 112 crore in the second installment.
Tata Motors paid advance tax of Rs 100 crore in the second installment, much higher than Rs 19 crore last year.
Bank of India paid Rs 470 crore as against Rs 230 crore.
Bank of Baroda paid Rs 412 crore compared to Rs 255 crore.
Yes Bank paid Rs 58 crore as against Rs 33 crore.
BPCL paid Rs 312 crore as against 40 crores.
Lupin paid Rs 49.7 crores as against 11.4 crore in the same period a year ago. Ambuja Cements paid an advance tax of Rs 150 crore as against Rs 70 crore in the previous quarter.
This clearly shows that the India business houses are recovering and hence the market took the cue from the fundamental cue and rallied heavily for the past few days.
Outlook:
Correction might take back seat for a while and the market is expected to rally further on the back of advance tax numbers.
The September quarter results may give further strength to the market.
Typically this is a Buy on dip market.
Use any market correction to make your investment in suitable companies / Mutual funds
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My 2 Cents...
ReplyDeleteSince 2007 Sensex has consequtively yielded 1000+ in earnings for two years... It was then at 20-21k... Now despite two years of earnings it is quoting at sub 17k...and is at multiples of 17odd. So in my view risk-reward ratio is clearly in favour of being long as market is attractively priced vis-a-vis its historical ratio.
Please correct me if I'm wrong.
Rgds,
Nilesh Sangoye.