The bourses across the world are sailing in a bearish journey
which is filled with full of negative news such as double
digit inflation, economic slowdown, historic rise in crude
oil prices, fallout of leading mortgage players like Bear
Sterns, Fannie Mae and Freddie Mac, rising commodity prices,
political uncertainty etc.The survey conducted among the global fund managers by
Merrill Lynch (2008) reveals that there is a shift in the
preference of fund managers towards investment in emerging
economies into developed economies, i.e., the fund managers
prefer to invest in safer developed economies compared to
emerging economies.
The BSE Sensex tanked by 40% in the month of July 2008
when it stumbled to below 13000 points from its peak of
21000 in the month of January 2008. Nifty slid by 38% from
its peak during the period January- July 2008 (it fell down
from its peak of 6500 points to less than 4000 points).
Most of the diversified equity schemes have given negative
returns during the past one-year. Out of the 170 schemes,
which have reported their one-year returns as on July 18,
2008, only six have given positive returns.
Though the stock markets have produced negative returns
over a one-year investment horizon, experts are of the view
that the prevailing bearish phase in Indian bourses offers
a golden opportunity for long-term investors to enter the
market. Needless to say that this is the right time for
the existing shareholders to accumulate stocks which are
fundamentally strong and available at cheap valuations.
This downward trend also offers an opportunity to the promoters
to accumulate their holding through share buybacks. DLF,
SRF, Reliance Infrastructure, Patni Computers and Great
Offshore are some of the companies that have announced their
buyback plans during the financial year 2009.
Almost all the sectors have seen a dip in their price earning
multiple. However, it is prudent to analyze stocks based
on certain key performance indicators which are sector specific.India
has not lost its attractiveness despite the prevailing worries
on political uncertainty, inflation, poor IIP numbers and
current account deficit. Though the sovereignty rating for
India is downgraded by the leading international credit
rating agencies such as Standard and Poor's and Fitch, the
long-term outlook for the economy seems to be positive with
a GDP growth rate of 8% plus. The recent fall in the crude
prices from $145 to $126 and the positive estimate of food
grains output are expected to ease down the worries in macroenvironment
in the coming quarter.
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