Short term investment strategy

This year has seen a lot of upsurge in stock market. If 2008 was a year of great fall, sorrow and depression, 2009 has seen the confidence coming back to streets. Things were looking in a good shape and today they look even better. but we need to ask one question, ‘Are they really in good shape?’ because something, as devastating as recession, cannot be healed in few months. It’s a process which should take more time than it has, so we need to be more vigilant while looking for truth. The global economical situation has stabilized but still remains delicate.

USA had registered positive GDP for few quarters but analyst are not sure whether it’s temporary change or recovery will continue at the same pace. In India, things have been quite different from west, recession has not been here at such a large scale but country has witnessed a slowdown in its economical growth. There has been a complete turnaround in last 12 months or so.

As per expectations, inflation is above 7 percent and expected to remain in same range in next six to eight months. Central bank had been taking steps towards tightening monetary policies. Government may also think to further reduce its fiscal deficit. Companies have done well so far in managing profits and margins.

Though, they are stuck at the topline and if sales didn’t improve, it will be quite difficult for them to sustain profitability. Sales have been growing but inflation and rate hike is threatening their future margin growth. The companies have derived a lot from their robust bottom line growth. Cash positions have improved. There have been few sectors which have seen a year like never before. Auto sector, being one of them. They have recorded huge growth in sales and profit.

FMCG and pharma sector have been quite resilient and IT sector has managed to survive with some improvement. Market has moved up in a very unconventional way and had almost doubled from level in one year and currently trading around 18000. Analysts are quite skeptical about further up move. Analyst believes that now onward key remains with foreign institutional investors. Volatility will remain in the market and market will largely depend and in and out flow of the FII’s. As per experts, valuations are very high at the current level and are cause of worry in the short tem. Margins are still tough to be maintained but in the long term things are quite promising.

FIIs have withdrawn a lot of their funds from Indian stock market in last few months. Though, domestic institutional investors have been investing consistently in the market. As this is the last month of the financial year, they have to update the result and it is quite common for them to invest in this part of the year. But things may change next month in April. Stock Markets have rise for last four days but short term outlook still remains negative.It is yet to see the direction taken by the stock market from here.

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