Monday, April 6, 2015

Responses given to ADC on Questions relating to Markets.

 What is driving the markets crazy?

There are several factors that are on the minds of traders (investors can ignore many such factors) like the conflict in Yemen, Strong economic data from the US and its resultant impact on emerging markets, the untimely rains and its impact on crops leading to further inflationary trends and its possible impact on the RBI policy with respect to further reducing interest rates. Add to this the volatility in international prices of crude and its impact on the Rupee and the ability of the government to pass contentious legislations successfully.

- With the markets yo-yo-ing 500- 600 points alternatively ...what according to you is the reason for such volatility?

Many times the volatility is witnessed due to technical factors also, which seems to be also contributing to the see saw. Our markets have seen stocks surging, and soon we shall have the result season, where the expectations are that the results of individual companies may not keep pace with the prices already risen, hence that has added to selling pressure. Add to this the expiry of March contracts on the FNO segment. We also have to account for some positions being pared on account of the Financial year end when liquidity is generally tight and the focus is mainly on closing the books. Alternately, factors like expectations of a further rate cut and firming of prices for year end NAV’s try to  tilt the scales on the other side.

- With the weather playing the spoil sport with current crops ...and danger of El Nino looming large .. where do you see the markets six months from now...

Predicting markets is something like predicting the weather.., the kind of weather we have lately had has impacted crops and will lead to a situation where prices go up further. This inflationary impact could have a bearing of further rate cuts unless it is balanced by prices of crude falling. This is in the immediate short term, by second/third week of July we should know the monsoon situation clearly, and that will largely dictate the trend for the market thereon. Although initial assessments are that we may have a near normal monsoon. By September I see the Sensex between 30000-31000.

- At what level do u see the markets by December 2015 

If we get atleast two interest rate cuts by the RBI till December 2015 the markets will be in the range of 32000-33000 during the period Sept- Dec 2015.

- Any suggestion for the small investors  

For the small investors, the best bet is to keep investing small portions of money regularly either directly in select high quality blue chip stocks or go the Mutual Fund route. Either way they should not react adversely to the volatility and be aware that even hard core professionals find it difficult to time markets. It is finally the Rupee cost averaging that will work in their favour.

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