After recent strong gains of nearly 9-10% by the benchmark indices in the last one month or so, the stock market rally has essentially gone quiet.This uptrend was due to the risk on trade in emerging markets led by the deferred decision to increase interest rates in the US by the Federal Reserve. Now with a flat Q2 earning season and a reported downgrade in guidance for most of the sectors, the Nifty seems capped at the top end of 8,400 for the time being. The global markets have also become complacent lately while experience and past research shows that what comes next is a jolt.
With the disappointing Q2 earning season set to close in the next two weeks, there is nothing to look forward to for market men. There is also a feeling among smart traders and operators that foreign investors are holding on to the benchmark indices but under cutting their equity cash holdings simultaneously without creating any panic or volatility in the stock market. The India Volatility Index is hovering around 16.62 as on Friday last, down 6.20% in the last one week thereby showing us that the magnitude of change in stock prices is minimum. Retail investors have been smart and put money in equity mutual funds through the systematic investment route and averaged their risk in a staggered manner. We feel that this is the best option of investment for long term wealth creation. Drug firm Sanofi India announced its Q3 financial results ended 30 September 2015 last week with the total income from operations rising to Rs 585 crore against Rs 515 crore for the same period of last year. On the other hand, the company posted a net profit of Rs 72 crore, a rise of 17% over the corresponding period of the previous fiscal. The Sanofi share currently quoting at Rs 4,140 is not expensive by any standards and is a value buy for one year time horizon with a 25% price appreciation. The European Central Bank (ECB) in its policy meeting announced a stimulus package on Thursday that will bolster its bond buying program. The money would increase the appetite for risky assets around the world and fuel a stock market rally. Triggered by this positive news, Indian equities displayed a good performance with the Sensex closing at 27,470 up 283 points and the Nifty ending 43 points higher at 8,295. The market outlook indicates momentum in favour of the bulls and may see a short term rally in the target zone of Nifty 8,330-8,400. Technically, a retracement could happen from the higher level in the next few weeks.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.