Random Thoughts

May sanity prevail post Liposuction of stock markets

The fall in the Indian equity market over last one week may have left investors poorer by a few lakh thousand crore rupees (market capitalisation of BSE reduced by Rs 14 lakh crore or USD 35 billion. This means it lost about 20% of its m-cap within seven trading sessions).
Post loss, however, the market looks slim and trim. The flab or the exuberance as some might say is gone to a great extent. Stocks had run a great mile in last few months with valuations for many marching beyond what fundamentals could support.

Now that the big crash is behind us, investors may see some value picks. However, care needs to be taken while selecting them as many are trading at a discount of as much as 50% to their pre-crash levels. So, almost entire market may look cheap at present.

There are some stocks that were not a party to the earlier rally in a big way. Especially the IT and pharma sector companies were laggards. Even though these scrips did not rise to staggering levels, they were got beaten during the last week’s turmoil. Thus, there is a chance that some of these may look good may be based on the dividend yield or the growth prospects. But, there are no easy answers and investors need to do some homework rather than depending upon the so called ‘sure shot’ tips from their brokers.

Labels: Money matters

posted by Ranjit @ 1/24/2008 03:14:00 pm