On Thursday, it was carnage across the global markets in early trade with the entire week seeing frantic selling pressure across the globe. When selling happens across the globe, India is not isolated, since Indian stocks are heavily owned by Foreign Institutional Investors or foreign funds. They sell Indian shares, if there is the slightest hint of global turmoil.
On Thursday they net sold in Indian shares to the tune of Rs 1140 crores, and in the month of Oct their sales has thus far crossed Rs 5000 crores in the cash market.
1) Greece problems beginning to rear its head again
Greece problems have begun to resurface. Bond yields have now almost touched 9 per cent there, which is an ominous sign that all's not well. When there is a problem in any part of the globe, it tends to have an effect markets across the globe. Greece will affect Europe first and then other countries.
2) Economic data across the globe remains weak
Economic data from China has not been too encouraging and European Power House Germany reported poor manufacturing data this week. Data from the US too has not been very encouraging. It looks like the global economy is faltering, which is not good news.
3) Costliest markets in the world
The price to earnings multiples of Sensex companies is at around 18 times one year forward earnings. This is not cheap any longer. It is way above most BRIC nations. This makes it one of the most expensive markets in the world.
4) QE3 to be over later this month
The US Federal Reserve pumped billions of dollars through its QE3 programme. The entire QE3 Programme will be over later this month. The QE3 programme unleashed billions of dollars in the US and a lot of the money found its way into emerging market stocks like India. There would now be no easy money left to drive stocks higher, as the programme will be over later this month.
5) Indian Markets have run-up too fast
The Indian benchmark indices have given 50 per cent returns in the last one year. This is phenomenal by any standards. Those who have made money have started booking profits. We cannot have a situation where astute investors would keep paying any price, just because we have a stable government in place. Investors are no longer naïve.
If you have invested in shares last year, you should have most certainly made money by now. Book profits and wait for markets to fall further and buy on declines. Chances of you making profits would be high.