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Sensex shaves off 1600 points in 11 trading days; is there a bottom?

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Sensex shaves off 1600 points in 11 trading days
"This market may be a slow moving train wreck," a headline on cnbc.com describes Indian markets.
 

The Sensex has lost a mammoth 1638 points in 11trading sessions - a frightening fall in which mid cap stocks and small cap stocks have plummeted to abysmal depths.

Interestingly, in these 11 trading sessions the Sensex has fallen 10 times.

Banking stocks have plunged to new 52 week lows and the prices of some PSU banking stocks is petrifying for those who had invested in these stocks one month ago.

The real problems for the market is that you can't find shelter anywhere. Earlier, investors took shelter in safe haven stocks like ITC, HUL, HDFC Bank, HDFC and TCS.

ITC has collapsed from Rs 370 to Rs 320, while HUL has fallen from 52-week highs of 720 to Rs 600 in 3-weeks. Similarly, HDFC Bank which hit a 52-week high in May of Rs 720, has fallen to Rs 606.

Interestingly, software stocks have rallied over the period and investors have found refuge in Infosys, TCS, HCL Tech and Wipro. But, on Wednesday IT stocks started cracking, as investors remained worried over their valuations.

The problems for the stock market arise from weak economic fundamentals. First, the rupee has fallen-off a cliff and is showing no signs of gaining ground against the dollar. It has already hit a new record high of 61.80 against the dollar. To tame the rupee the RBI tightened liquidity, forcing some of the banks to hike rates. High interest rates in an economy that is seeing growth rates at a decade low is not good news.

The services data which came in has contracted for the first time in 4years. Analysts at foreign broking firms are busy downgrading India's GDP and CPI inflation is not heading any lower. To compound miseries parliament has seen an impasse, which means the passage of economy related bills looks difficult.

 

With a few months left for the General Elections, it's possible that reforms make take a backseat. Clearly, nothing seems to be going right for the Indian economy at the moment. The only silver lining is likely to be the good monsoons which should propel agricultural growth. So, if you plan to buy

some beaten down stocks at today's attractive levels, make sure you can hold them for at least a year.

GoodReturns.in

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