Fwd: <> Has the stock market bottomed out?

The global turmoil has pushed Indian stock indices to levels
unthinkable. Is there more pain ahead or is it time to buy? experts
weigh in.

Sudip Bandyopadhyay
Director and CEO
Reliance Money

International credit markets are in a crisis and the stock markets
have been shaky. Nobody is in a position to react to the big macro
issues such as where the dollar is going, what is the likely GDP
growth of US or China, and so on. For every smart person on one side
of the question, there is another smart person on the other side.

The Indian financial markets have also been witnessing sustained
volatility and clearly global cues are the deciding factor, in the
absence of any strong domestic positive news. The US economy and its
future course will be a critical factor in assessing the FII mood and
market sentiments, going ahead.

As far as the valuations are concerned although the Indian markets are
now trading at 14-15x FY09E, and a large part of the froth generated
is now out of the system, the sustainability of any upward move in the
market clearly depends on global factors.

I feel that the markets are trading closer to fair fundamental value
but a minor down-move is not ruled out in the short term. One key
deciding factor for the Indian markets will be FII liquidity, which
seems to have completely dried up and unless this revives
substantially way, we may continue to see volatile and choppy markets
for another 3-4 months, followed by a noticeable recovery that could
start from September '08 onwards. However, even this will be subject
to the forthcoming general elections, which now look scheduled early.

As mentioned earlier, the full effects of a global meltdown are not
yet fully factored in by the markets. Any fresh adverse news on
subprime crisis, and slower US economic growth will continue to have a
negative impact and will be a cause of concern for emerging markets
like India, where one could see redemption pressure from FIIs to fund
their subprime losses in other markets.

Clearly, retail investors should look at the SIPs (systematic
investment plans) of mutual funds as the right investment option if
they do not have the ability and the capacity to take risk directly.
Equity as an asset class will definitely bounce back and offer
significantly better returns over the next two-to-three year horizon.
With elections looming near the corner, the markets will continue to
remain choppy and volatile and this may keep investors away from the
markets.

Nevertheless, this is an excellent time for an investor to build a
quality portfolio of stocks because prices of almost all blue chip
stocks have come off by almost 50% and hence returns from these levels
over the next two to three years will be a significant for any retail
investors. However, they will have to be patient and have the
conviction in their investment decisions and take a long-term call on
the markets without looking at the short-term aspects. It should be
very clearly understood that the India story continues to remain
strong but sentiment has taken a beating due to unfavourable global
developments.

Retail investors should never try and time the market; they should be
in the market for a time. Other than equity, traditionally, retail
investors have been investing in instruments like National Savings
Certificates (NSCs), RBI bonds, post office, etc., and all these
investments are for five years or more.

However, unfortunately, while investing in equity, retail investors
tend to take a short-term view and look for almost instant gains. This
short-term approach needs to be curbed and equity, as an asset class,
needs to be considered by the investors for long-term deployment. If
this approach to investment is followed, the current market scenario
is ripe for retail investors to enter for making substantial long-term
gains.

Source: Economic Times


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Thanks & Regards,
Shailesh
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