Bearish Overtones Set To Continue

The stockmarkets, according to observers, have decisively entered a bear phase for the time being. This is bad news for speculators as it would not be advisable for them to hold positions in growth stocks because of the pessimistic outlook. Further, marketmen feel that this is the best time to pick quality stocks which hold value both in the medium and long terms.

The Bombay Stock Exchange Sensex is at 10-month lows and close to the psychological barrier of 4000. A section of the participants is of the opinion that it may breach this level and stabilise around the 3800. From thereon, the trend is seen rangebound.

 

Another section feels that this could be a trigger point from where a decisive rally could be expected. Only the coming weeks will prove which section has got it right.

Meanwhile, most of the ICE stocks are out of favour with the market. Thanks to the hangover triggered by the the not-so-good financials announced by ZEE. But on deeper introspection, one should realise that many of the quality ICE stocks are available at a bargain. Some of them are quoting at their half-yearly lows which makes them very attractive for value hunters.

Another sector that has largely been ignored but which holds enormous potential in the medium-to-long term is pharmaceuticals. Some of the fundamentally-strong pharma stocks are available at PE multiples ranging from a lowly 10.1, in the case of Unichem Labs, to a modest 23.4-23.7, in the case of a blue-chip like Sun Pharma. Even a multinational pharma stock like Glaxo is quoting at its yearly-low of Rs 321, which is discounting its trailing yearly EPS at a modest 25 times. These are just few of the quality stocks that could come into limelight in the coming days. For the really curious player, many more opportunities could come knocking on the doorstep when the market is totally immersed in a negative sentimental bout.

Most of the big players are of the opinion that the markets have entered or are on the verge of entering a prolonged bear phase. They add that it could be range-bound phase from now on with bulls and bears having a field day. What is a long-term investor expected to do in such a scenario? The question could be answered by applying simple logic regarding cyclical ups and downs witnessed in the markets.

Markets are said to be in a bear phase when stocks quote at their historic low levels with PEs too in a very low range. Such a market throws up many opportunities for a long-term investor to fetch a bargain. It is for such investors to decide whether to take the plunge or wait for another cyclical downswing.

Market review: The recently battered information technology (IT) and telecom counters led a recovery on the Delhi Stock Exchange (DSE) last week on revival of buying by foreign institutional investors and domestic infotech mutual funds, agencies report.

The DSE sensitive index, after opening higher at 877.48 points, rallied to cross 890 points (intra-session) on the back of recovery in index-related stock prices, but winding-up of positions on account of end of settlement, slipped back to close 4.82 points up at 869.69 points.

However, operators turned reluctant towards the fag end of the week following the lower outlook weightage given by Morgan Stanley Capital International (MSCI) in its emerging market free index. Hike of half a percentage point in US interest rates by the Federal Reserve also had its shadow on the sentiments after FIIs adopted a cautious approach, they added.

Shares of Global Tele-Systems, Himachal Futuristic, Silverline Technologies, SSI and a few others traded heavily for the major part of the week after these stocks were included in the MSCI index.

Silverline Technologies stocks, after witnessing a long bearish phase, staged a recovery and share prices rebounded to cross the Rs 400-mark to touch the week's high of Rs 425 on massive buying before settling Rs 33 higher at Rs 390.75. It plunged to a recent low of Rs 318 after opening subdued at Rs 361.

Satyam Computer bounced between Rs 2,475 and Rs 3,230 on hectic selling and buying by major players and concluded Rs 138 higher at Rs 2,898 while Pentamedia Graphics succumbed to selling pressure and finished Rs 41.05 down at Rs 447.