It was massacre on the street; Sensex lost 10% this week on global woes of metal crash and some Tax issues. Friday saw a classic trap for the retail investors.
It was a terrible week for investors. Unprecedented fall was the order of the day. Markets fell by over 1200 points which is exactly 10% down. Previous week we saw weakness because of Government talk of price control on cement..so really investors were complacent expecting the worries to get blown over. However, the metal crash caught everyone unawares..!
The week started off negatively with a terrible Monday with an over 600 point fall on the back of Metal price crash and negative global cues. Tuesday morning was another disaster day but recovery in metals had a smart bounce from the lows and markets ended marginal positives. Global stability on Wednesdays brought in smiles on the faces and markets had a rigorous run up up over 350 points as investors are now in a habit of expecting a strong run up post such a fall. Thursday was history as Markets dropped the maximum ever down over 850 points. The excuse was a US meltdown on worries of higher interest rates..and another one was a tax circular talking about higher taxes for Short term gains. FM made a statement only later in the day that FIIs could not be classified as traders. This fuelled in buying on Friday morning and set the stage for the meltdown as was seen. We actually predicted this movement for Friday. Do read hunters pick. It was a perfect set up and A classic trap for the retail investors.
Almost all the stocks in the index were losers... but the real big losers were Tisco, Hindalco, Maruti, ACC, Bajaja Auto, Reliance Energy, Satyam, SBI, Wipro, Tata Motors. Tisco Hindalco landed up losing over 20% for the week.
The week started off negatively with a terrible Monday with an over 600 point fall on the back of Metal price crash and negative global cues. Tuesday morning was another disaster day but recovery in metals had a smart bounce from the lows and markets ended marginal positives. Global stability on Wednesdays brought in smiles on the faces and markets had a rigorous run up up over 350 points as investors are now in a habit of expecting a strong run up post such a fall. Thursday was history as Markets dropped the maximum ever down over 850 points. The excuse was a US meltdown on worries of higher interest rates..and another one was a tax circular talking about higher taxes for Short term gains. FM made a statement only later in the day that FIIs could not be classified as traders. This fuelled in buying on Friday morning and set the stage for the meltdown as was seen. We actually predicted this movement for Friday. Do read hunters pick. It was a perfect set up and A classic trap for the retail investors.
Almost all the stocks in the index were losers... but the real big losers were Tisco, Hindalco, Maruti, ACC, Bajaja Auto, Reliance Energy, Satyam, SBI, Wipro, Tata Motors. Tisco Hindalco landed up losing over 20% for the week.
| Its all about Greed and Fear and one needs to overcome that. Markets are certainly oversold.. and its time to pick some long term favourites. |
| This week was characterised by the meltdown of all global asset classes. This can't be said for real estate but even the real estate plays in the Indian Markets came in for severe selling and profit taking bout. The CBDT circular talks about differentiating the capital gains to be paid depending on the kind of investor. Investors are allowed 10% short term capital gains. The circular attempts to categorise those investors who have been having short term capital gains. The important thing here is to assess whether the assessee is an investor or trader. If he is categorised as a trader then all short term gains will be taxed as business income. FM has categorically said that FIIs are not Traders which is ok.. but this has really opened up a can of worms for the individual segments. This puts a lot of power with the Income tax Assessing officer. FIIs have been sellers this week and that has brought in the fear that there is a complete selloff. MFs have been buyers and have been deploying cash. Overall there has not been as much selling as the wealth has been destroyed.. Its just the change in sentiment.. When all investors wanted to buy when Index was at 12000 .. today no one seems to be interested 10% lower.. These are markets ruled by Greed and Fear.. It was Greed then.. and its Fear now. The one who win are those who are practical and can over come this sentiment of greed and Fear The reason for the crash was accentuated by the huge F&O positions. We are nearing the end of May F&O cycle and the fall has created a huge demand for mark to market margins. The selling has happened in cases where traders have not been able to provide the margins and this has brought in more downsides and need for more margins. Its a cascading effect. Its just that when the cascading effect is over Markets will tend to bounce back fast. The long term story remains good and nothing has changed really. We believe that this opportunity should be used. Cement stocks have corrected significantly. Demand conditions are robust. The supply is going to remain limited for the next 18 months and things look extremely exciting. There are also the Engineering stocks.. but, really it would be important to check out valuations and have an investment horizon for over 18 months to avoid disappointment. |