Sunday, November 02, 2008

 

India stock market update as of 02 November 2008

The last 2 months have seen sheer mayhem on the Indian (and global) stock markets. Share prices have plunged sharply, with some companies now quoting at book value levels. This is the case with large caps, companies with fundamentally good records such as Hindalco, Tata Motors, etc. So, you can imagine the case of mid and small caps. Shareholders in smaller companies have seen their share value plummeting massively, with a massive pullout by FII's from the Indian market. Till January, there was a talk about decoupling of the Indian economy from the US and global economy, but no one talks about that now. The overall credit squeeze that started from the US economy has impacted the Indian economy now.
Now the important question is about what to do now ? There are many negative indicators in the Indian market right now:
- There are no sustained indicators about FII's stopping their selling
- The US economy is now in recession, and there are no quick trends on when the economy will pull out, and how deep this recession will be
- The Indian economy has started slowing down, with companies reporting results that are not as buoyant as you would expect
- The realty market is almost at a standstill with the number of deals having reduced significantly
- Overall consumer spending has started falling, with even the Diwali period not displaying the expected pickup
At the same time, the market is very volatile. The last session of the market saw a major jump, but no one should take this to be the pattern. At the same time, there are 2 sayings:
- The time to buy is when everybody is selling
- Fundamentally good companies are always worth buying
So, what will I do next ? I am starting to buy, at very small levels, the following companies:
Hindalco, Reliance, Suzlon (a contrarian play), Unitech (high risk, and high potential upside), Tata Motors (even though the company's results have not been so good)

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