Markets On A Free Fall Mode

August 27, 2011 | In: Stock Market Analysis

Our markets have been performing horribly, completely under performing it’s peers and specially the west. At a time when we had just macro concerns, we held 5200 on the nifty several times and global recession fears dragged us to 4800 and now even when the markets on the west are not falling as much, we’re slipping on a daily basis. The important levels of 4800 was also broken today and in a huge panic. I could see several large cap stocks crashing 5 – 10% which was painful. The worst part is that the markets are falling rather sharply which is a great concern. Now everybody is talking about 4500 levels soon to be seen on the nifty. There is hardly any buyers out in the markets due to all the negativity. The concerns are growth worries, Brent oil jumping to $111 per barrel and Inflation refusing to come down.

On the positive side, each fall on this market is giving a very good entry point to long term investors where one can cherry pick good quality stocks on cheap valuations and hold tight till markets rebound in future. I don’t recommend trading short term at all. A lot of people are buying into the markets for 2-3 months perspective, well please don’t. This free falling market is not the right time to buy with such a short duration. Invest into the market at current levels and using each declines to buy some more ONLY if you are going to stay invested with a long term horizon, atleast 12-18 months.

There is a lot of uncertainty in the markets and it is going to remain so lackluster for a couple of months more. The best part for this consolidation move in the lower levels is as each month is passing, the investors are getting their salaries from where they could fetch some money to buy good quality stocks on these prices. I shall advice investors to keep buying into good quality stocks on every declines and have a 15-24 months view, you will definitely make a lot of money. The only risk to your return is if you’re not buying into the right company. Stick to good quality stocks and avoid stocks you have no clue about.

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SONI

Hi Mayank!
Recovery of nearly 1000 points in just 2 days!
Is it just a temporary bounce back?
I have TCS and HCL in portfolio which is giving 5-6% profit is it a good time to book it or hold little more? Do you expect a fall again as of last week?
Can you share your views on Guj NRE Coke?
Cheers,
Soni
http://www.mayankrocks.com Mayank

The bounce back was due since we had fallen too fast too much outperforming the peers on the downside. So a bounce back is not surprising. I still think we should be in a range 4800 – 5200 or on a broad side as everyone is saying 4600 – 5400 Just keep focus on individual stocks rather the nifty/sensex and use every significant downside to buy further.

Gujrat NRE coke is bad. The company is far from giving a sustainable consistent growth and fluctuates too much in it’s profits (Look past years profitability). Current Valuations don’t look interesting too. Go for companies with consistent and sustainable growth rates.

IT sector question is a bit tricky. If US/Europe sees a slowdown then IT companies will face slow down and their extremely high valuations will be slammed down. However if there is no slow down or recession like things, IT companies will bounce back to where they were. And to be honest nobody knows whats going to happen too. It is a mixed picture. It is simply linked with the global picture. If markets fall again, IT will go down, if not, then IT might hold where they are. It would be your call. However on further upside, I can suggest profit booking since if I go directly in terms of valuations, TCS is indeed rich, very rich. I would personally sell IT stocks on further rally and go on cash. I would be more comfortable in a quality mid cap stock which is giving good growth and is available at a dirt cheap valuation today.
Swagata Guha

Hi mayank, it’s Swagata. Well, I have bought 1000 shares of GVK Power & Infra at current levels( Rs. 16.8/share).Can u give me your views on this share? Is it fundamentally a good one and can it give a good amount of returns?
http://www.mayankrocks.com Mayank

16.80 is a good price to enter GVK. But this is going to be a real test of patience for you. You will need to have a pretty long term view and it should give good returns. I cannot give a target price for it due to so much uncertainty in infra space as a whole, high interest rates etc. GVK put up more stake in Bangalore Airport which will stretch the balance sheet even further. So headwinds in short term, but long term story intact. Hold it from a long term view, you’ll make money for sure.
Anonymous

Hi Mayank,tell me one thing.I m very new to the share market.So i have invested lots of money on recomendations given on various trusted sites and prefer to buy cheap and good stocks. But these are all on the recommendations of others. Can you advise me how can I decide on company’s performance on my own,can decide my targets on the company.What should I know,what not.I hope you can understand what I mean to say.Can you refer me a site from where i can know the fundamentals of trading/investing,how to read trends,all commercial terms etc. so that i can be the best knowlegable person in this area to maximise my profits in shorter terms. I have huge interest but unable to understand how and from where to start.Kindly advice mayank.
VJ

Hi Mayank,
How are u? There is no post/article now a days. we are seeking some new posts. if you have time keep posting.

Thank you.
http://www.mayankrocks.com Mayank

Hi swagata, it is a bit confusing in the beginning. It’s great that you are interested in learning further, there is a lot to learn but it’s easy. It’s hard to write a lot here in comments. Have you used the correct email while commenting in this blog? So I can perhaps send you a mail sometime, or you can send me a mail at mayank@teenhut.net and I’d reply you back. You won’t need to refer to websites for further confusion, I’ll help you understand analysing fundamentals. Also sorry for late reply, been stuck at new job without a laptop or computer.
http://www.mayankrocks.com Mayank

Hi vj,
I’m good, just stuck at tthis new job training, don’t have a laptop or pc here since we are living in campus of the company and they don’t allow laptops, got an iPad and a sim, so I’m online now. I might be able to update the blog from now, just not sure how often due to busy schedule.

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