Weekly Outlook on Indian Stock Markets - 1st October - 5th October, 2007

The last two weeks gone by were no less than Diwali celebrations for Indian stock markets, with both Sensex and Nifty crossing the psychological levels of 17000 and 5000 respectively. There was no point in the current rally where one can see the profit booking or correction ticking in the stock market. BULLS ON THE RAMPAGE… Isn’t it?

Now what’s next? That’s the million dollar question. Will we see another week of relentless buying by the FIIs and Mutual Funds? Or, will we see correction taking the markets below the 17000 mark for Sensex and 5000 for Nifty?

Well, if we look closely, there are several factors arising that may disrupt the upward journey of the Indian stock markets.

The most important one is the “Political Instability”. Sunday’s newspapers were filled with Left hard stance on the nuclear issue and a renewed threat on government stability. West Bengal wing of Left, which till recently, looked sympathetic towards reforms and nuclear issue is now singing the same tune as others in The Left. These signs look ominous for the Congress government and stock markets will surely not ignore it. Thus, there are chances that stock markets may not open in cheerful mood on Monday.

The sector that is expected to do well is the “Sugar”. The government is all set to announce the relief package for sugar industry in the cabinet meeting on Monday and it may set the platform for the sugar stocks to go upwards. Also, the coming festival season will also give the much required boost to the sugar industry. So, if any of you is holding sugar stocks, three cheers for you.

Another sector that can help market in sustaining their present levels is “Information Technology”. The sector was hammered down quite a lot in last three months. But one must not forget that this sector has been the darling of every government – be it was BJP government or the current Congress government. The government will surely try to support the sector by giving some kind of tax exemptions or a relief package. There are chances that government may announce some relief on Monday when it sits down to discuss various economic issues.

In nutshell, markets are expected to be range-bound this week. So, it is better to be stock-specific this week. One can pick sweet sugar stocks like Renuka Sugars, Gulshan sugars, Dwarikesh, and Balrampur Chini for short-term gains. Besides, one can also buy quality Information Technology stocks, especially Satyam and TCS. Both these companies took early action towards currency appreciation than others through hedging and have less exposure in US markets than Infosys or Wipro.

Another IT stock that looks interesting is Vakrangee Software. It is a Banglore based Software Company that develops and maintains software for various government agencies like Election Commission and Railways. It is a debt-free and rent-free company, which makes it very attractive. Thus, one can see such IT companies which work domestically and hence, are insulated from currency fluctuation. The stock was trading at around 190 on Friday.

Be aware, Be cautious and Be an informed investor! Only invest in a company after thorough research. There is a wide spread notion about Stock markets that these are speculative. But is it speculative only for those who buy stocks without research and hence, find themselves in a tough situation. If you know that the company in which you are investing your money is good, you will not live in fear and will take every correction as the opportunity to enter at lower levels. Hence, you will be buying at times when feared and ignorant investors will be selling.

Wish you all a profitable week ahead!