Indian Stock Market Outlook

For the last two weeks I have been getting ample of emails on the outlook of Indian markets. Due to busy schedule I will not be able to for sometime reply most of the emails. I would like to use this post in answering most common market and stock questions posted by our subscribers.

1) What is the outlook of Indian markets after a deep crash last week?. Can the markets go down even further?

Last week saw market swinging down by around 4000 points, thanks to the end of week recovery.

We had cautioned our investors on several occasion to take a conservative call on the markets Click Here and to book partial profits.

Despite the recent sharp correction, Indian equities have delivered relatively good performance over a three months period compared to it's Asian and Global peers.

The strong performance of Indian markets compared to the Asian peers can be attributed to the money inflow from Domestic Institutions of around USD 1.5 Billion as against the FII outflow of USD 3.5 billion dollars.

As such with the global economy outlook, the chances of US entering to recession (or slowdown, whaterver name it) has become high. With FED cutting interest rates by almost 125 basis points in a week shows the impact of damage the current credit crisis has caused to US Economy. Though the Indian economy has come to stand on strong domestic factors we cannot rule out the fact that a more pronounced correction in the US economy is likely to have a repercussion on Indian economy as well.

As per data on SEBI website FII's have pumped in around 17 billion USD dollars in 2007 alone. The net outflow in Jan' 08 stands around 3.5 billion US dollars. Any further impact on global slowdown can see FII's pull out more money from the markets. The probability of market touching the recent low at this stage looks very high. Investors are requested to watch the global trends and take a call before taking position in the markets.

2) The US Credit crisis at this stage seems to have come to a stand still. Is it safe to say at this time the correction in Indian markets have been bottomed out?

You are right in one way saying the credit crisis as reported by financial institutions have come to a standstill. But not to forget there are lot of loan defaulters in this subprime market, many of those have already filed bankurpcy. Secondly, the current credit crisis in housing market can also trigger defaults in the US Credit card market. Not to forget the US credit card market is around 950 Billion US Dollars of money in credit. At this stage it is very difficult to say if the Indian markets have bottomed out or not. But if you are a long term investor you need not worry about this short to medium term volatility.

3) Which stocks are looking good at this stage after the correction?

As we had recommended earlier Orchid Chemicals and Tata Steel looks good from 12 to 18 months horizon. Currently we have initiated coverage on SCI and ONGC (Recommendation Follows) with a 24 months horizon. Hotel Leelaventure looks strong with all the expansion turning EPS assertive in the coming years. Keep watching our blog for multibagger recommendation.

To conclude, there is a saying that anyone can make money in a bull market, Investors are one who ride the bear market. Our portfolio has delivered an average return of 19% as against the sensex negative return of -2% over the 4 months period (Since our blog Inception).