Market Outlook : Opportunity to Buy??

We witnessed carnage on the D-Street today with the market closing 454 pts below its previous close. The Mid-Cap and the Small – Cap were even worse in today`s trade.

Reasons – Innumerable!!

SEBI Probe, 2g Scam, Loan Scam, Liquidity Crunch and what not...Though one of the main reasons can be attributed to a possible SEBI probe in all the operator driven scrips, this sparked off a huge sell off in the Small Cap space. This had a spillover effect onto the large caps coupled with the liquidity crunch and no clarity about the future action w.r.t scams.

Due to the highly volatile environment, the investors are forced to believe in any and every news and the immediate reaction is to sell off the stock. This in turn is to be funded by margins which results into selling of other stocks. This cycle lead to a strong sell off in the markets today.

On a long term basis, India has been one of the best performing markets amongst the Asian Pack. With a revision of the growth to 9%, and the food inflation easing out, our fundamental story still remains intact. This ensures that the FII money would keep pouring into the Indian Markets on a long terms basis due to the chances of a prolonged bull run.

However, there are no fresh short term triggers in the market which is unable to control this free fall. We have seen the markets ending in red for this entire week.

If the markets are able to hold above 19391, we could see a bit of an up movement in the markets. Crucial Support Levels for the day would be 19013 and 18784. 18784 should be seen a strong exit point below which we may see the markets free falling towards south.

The strategy here would be to accumulate specific stocks, on an up movement, from the defensive sectors like Pharma, Banking, FMCG, etc. apart from this one can also look at specific stocks which like HCC, Kingfisher Airlines, etc. A few of those would be covered in the coming posts.

The valuations of the market were pretty much the same what it was on 3^rd November`2010, the only difference being the investor sentiment!!!