Diwali in 2014 fell on Oct 22, when the Sensex closed at 26,783 points. This Diwali we are at 25,743 points on the Sensex a cut in excess of 1000 points or almost 4 per cent. It was euphoric in 2014, as investors went on a buying spree, thanks to a new government led by Narendra Modi.

A year later, investors have realized that corporate results have gone nowhere, nothing has changed on the ground and the aura that Narendra Modi once commanded is fast fading.

Companies like L&T, which is a good proxy for the economy, have given poor order guidance. Adding to worries is that interest rate cuts have been sharp and there maybe no interest rate cuts in the future. All in all as we head into Diwali, it is difficult to see how investors will get superlative returns until next Diwali. At best, if you are able to get returns of 10 per cent from equities until next Diwali, consider yourself lucky.

The key to these returns would be the investment from Foreign Portfolio Investors. These set of investors have been selling heavily in the markets in the last few days, and they are likely to do so, at least if interest rates in the US rise.

The US Federal Reserve would be holding its policy meet next month, in which it is widely believed that there would be a first interest rate hike in the US in the last 9 years.

If that happens there could be an outflow of funds from Foreign Portfolio Investors, which would mean a further fall in share prices.

Last year analysts were prediction 35,000 on the Sensex in Diwali 2015. We are nowhere near that and are in fact 4 per cent lower than last year. As we write, the Sensex has lost ground on 10 trading sessions out of 11.

We feel, the way corporate results have gone so far, markets should fall another 5 per cent to make them attractive. So, if you get the Sensex at around the 24,000 levels, you can buy into good quality stocks. Or else, just stay away.

GoodReturns.in