Markets Are Slowly Sinking
August 17, 2011 | In: Stock Market Analysis
Sensex and Nifty might be putting a different picture than what is the overall sentiments in the entire market. Yesterday sensex fell by a hundred points and today they went up more than a hundred points which means in the last two days the markets have not fallen at all as the index suggests. This is a misleading picture actually as the broader markets have literally sunk in the last two days. If you look at the advance and declines ratio, you’ll notice that advances are way less than declines which simply tells you that markets are actually weak as we speak. If some buying is seen then it is around the index listed stocks only. Coal India and IT largecaps have gone up in the last two days which has held the markets from sinking to new lows.
Now Im not sure why the sentiments have gotten so weak all of a sudden, but my guess is it has to do something with the Protest movements going all over India. Investors have gotten nervous and wants to wait and watch the conditions in the country before going back or perhaps many feel that this protests might have a negative impact and they are waiting for lower levels to accumulate. After the two day good corrections in midcaps, I would look to accumulate stocks at current levels. Nifty might have stayed above 5000 but there are several stocks that inspite of giving good results have sunk to the levels which are justified if markets were well below 4800 as well. Some quality mid caps are available at 52 week lows or even lower than that, so I would be a buyer there if I feel the earnings visibility of the company is strong and it is available at a cheap valuation.
A while back my suggest was to keep some money on the sidelines and wait for 4800 levels to accumulate. I would suggest to start using a bit of money and buy on every decline in quality midcap stocks. Personally Im am slowly accumulating a few selected stocks on every decline as I feel in the long run, say 4-5 years I would never get a chance to pick these companies this low, ofcourse unless a financial crisis comes out. In short, I’d say, found a good quality stock at cheap valuation? Keep picking them at significant downsidess.
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