Here with this post i would like to sum up with all the factors that engulf the current scenario.
Some positive cues are as follows.
Most investors are surprised at the way the Indian market bounced back in the last few days of June this year; actually India participated in a global bounce that was triggered by the Greece vote of austerity measure being passed on June 22, 2011. Global investors’ fears of European crises have receded and the risk-averse investors have reallocated funds in risky assets. This phenomenon is coinciding with certain factors in our domestic environment that leads one to believe that the bounce may continue for a while. Not to mention, foreign investors have bought Indian equities since June 23rd for every single day till July 5, totaling investments of close to $1.5 billion.In the second half of the year, global investors may re-start deploying funds in India due to its under-performance and correction. India no longer looks expensive to them.
To top it up the government has started taking tough but desirable measures like fuel price hikes and sending the right signals to the investor fraternity like clearing the Cairn-Vedanta deal. Right kind of noises are also coming on opening up of foreign direct investment in retail, especially after the finance minister along with some of his policy chieftains returned from his annual convention with policy makers in the USA. The ministerial panel may meet this month to consider clearing this proposal.
Some negative cues mainly driven by the regulatory measures of the government posing much of a menace are as follows.
The case in point is Coal India.First it was the talk about removing the free auction quota (10% of production sold at lucrative spot rates) due to pressure from the power ministry.Many investors sold out at much lower values to avoid damage from such a move. But alas, the government changed its stance and the stock appreciated by over 20% in a short period of time.
The media reports indicate that the group of ministers has approved new Mines and Minerals Bill that is likely to get introduced in the monsoon session of the parliament. As per the broad contours of the bill, the coal mining companies would have to share 26% of their profits with local population. In non-coal mining companies, it would have to share 100% of royalty paid with local population. Many stocks have been hit by this news with Coal India losing close to Rs20,000 crore of market cap in a single day.
Both Oil and Natural Gas Corporation (ONGC) and GAIL lost close to 15-20% of market cap after the ad hoc increase in share of the subsidy burden on upstream companies to 38% for Q4FY2011.
In the past, telecommunications (telecom) services companies have also faced the brunt of constant regulatory tangles. The regulatory and policy issues are also leading to a slowdown in retail investments in domestic institution, mutual funds and insurance companies. This leaves the market at the mercy of foreign investors with little ability of the domestic funds to absorb the selling pressure.
Risk factors being driven by Crude oil, all the other indicators are pointing to the direction that the market momentum that has turned buoyant may remain so for some time in the medium term after which all eyes will be on the April-June quarter results.
Also with the global slowdown persistent enough the risk factors for IT and BPO firms hold up to a danger level.
My take-> The real winning investment will be in those companies which want to scale up by catering to the Indian market.
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