DSIJ Mindshare

Tired Bears Could Provide Some Upside

Two out of the three days that the market will open for open for trades have already ended in the red. Today is the last day before we shut down for the week. Rising inflation, fears of a hike in interest rates, a not-so-inspiring performance from Infosys have ensured that investors turn cautious and book some profit. The decline over the past two days should not be so much of a worry. After consistently hitting new highs and getting euphoric over just one factor (elections and a stable government coming to power) such declines ought to happen. Any negative news is bound to throw up signs of weakness as the rise itself is based only on hope and not reality.

The fifth and the next big phase of the election is underway. The fate of 121 Lok Sabha seats will be sealed in ballots today. Though apparently, the markets euphoria over the expected outcome of the elections seems to have died down over the past couple of days, it is bound to come back, and, at that too with much higher intensity once the market settles down with inflation and results.

Though Infosys had rattled the markets, TCS is bound to play the savior on the results front. The optimistic view of the management for FY15 will be a good thing to come the markets way today. The company is expecting to grow at a rate higher than the industry body Nasscom’s predicted numbers. One has to read between the lines to understand the import of such optimism. TCS to a large extent (as compared to other software biggies) has a lot of business coming in from India itself. Expectations of ‘more opportunities for growth across multiple industries and markets’ mean a distinct improvement in the business sentiment. That is exactly what has been lacking so far.

The next 12 months, especially after the new government assumes power are being awaited keenly. All stalled growth is expected to pick up in this period. Though there is a lot of ground to be covered, the opportunity lost so far is so huge that growth has no option in any quarter and not the least for corporate India. The investment cycle is expected to pick up and hence industrial growth is likely to pick up going forward. Though all this sounds futuristic in nature, reality remains that if it does not pan out that way, the endgame for the Indian economy is almost certain.

While more optimism takes root on the domestic scene, here is what happened overnight in the western markets. A better than expected growth in China bolstered the US market sentiment for the third straight session yesterday, sending markets up yet again. A good industrial production report on the domestic front also helped the US markets do well yesterday. China also helped European markets gain strength in addition to their own weaker inflation data. Preference for risk assets is once again coming back. Asian markets have opened mixed this morning with Japan, China, Singapore and Korea trading in the red, while Indonesia, Hong Kong, Malaysia and Taiwan are trading positive.

The optimism of the TCS management, news flows of the trends in polling for the 121 Lok Sabha seats and overall mixed global cues will lead the markets today. Two consecutive days of incessant selling would have tired out the bears a bit. That could mean a positive open for the markets and a flattish trade to close the week.      

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