As we all know stock markets in short term are driven by market participants with short memory. Expectations of such people are higher and they will always expect something to be done in no time. UPA govt were clearly indicating from last one month, the various reforms and divestments they are going to do. In the union budget if those details are not disclosed doesn't mean that such reforms will not happen. Govt need time to think and plan its move, one can't disclose anything in just 2-3hrs. It might help market to cheep up but later on when the reality comes in it will fall. So it is always better to disclose complete plan rather than partial.
The drop in the Sensex by 870 points is a clear indication that this year's budget was not at all in favour of the corporate and industrial sector. "Buy on the rumour, sell on the news" seems to me the best explanation of the stock market’s swoon during and after the finance minister’s Budget speech today. It was a reaction which surprised us at the time and continues to do so.
Investors returned to Indian stocks after Mr Singh’s unexpectedly strong election victory on May 16, hoping that the new government would be able to restart its programme of financial reforms. In the budget, most of the social spending was tied to new roads, irrigation and power, a 144 per cent increase in India’s National Rural Employment Guarantee scheme for urban housing, and a promise to give credit at “reasonable rates” to small businesses.
During early trade Indices had surged in run-up to the budget on expectations of reforms but it turned out to be “budget of continuity and inclusive growth.” The government has given thrust to infrastructure spending, raised income tax exemption limit and scrapped taxes like FBT and Commodities transaction tax.
Bombay Stock Exchange’s Sensex closed at 14,035.67, down 877.38 points or 5.88 per cent. The index touched an intra-day low of 13959.44 and high of 15097.87.
National Stock Exchange’s Nifty ended at 4162.80, down 261.45 points or 5.91 per cent. The broader index touched a low of 4133.70 and high of 4479.80.
What next after such market fall?
- Long term investors: One must take this opportunity to buy/accumulate HBJ Capital's 10in3/Street Smart or Business Insights stock reco.
- Short term investors/traders: Better to keep off the market until the clear trend emerges. We still see today's market fall as a knee-jerk reaction which was over done by short term motivated market participants.
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