Fact Sheet (Nov08): Watch and Invest is best for this month

Overview: The BSE Sensex was at 13006.72 in the beginning of the month and Nifty was at 3921.85. By the end of the month, Sensex was at 9788.06, down 3218.66 points (-24.75%), and Nifty was at 2885.60, down 1036.25 points (-26.42%). Mid-cap index began at 4816.24 and closed at 3200.02, down 1616.22 points (-33.56%), while Small-cap index open at 5607.30 and ended at 3765.11, down 1842.19 points (-32.85%). October also saw FIIs net selling stocks worth Rs 15347.30 cr. Domestic Mutual Funds continued to be net buyer in Oct to the tune of Rs 1474.50 cr. During the month, the entire indices show substantial downward trend. Realty (-44 %), Metal (-40.93%) and Capital goods (-34.48%) were the worst hit. Though the prices of Crude Oil had eased almost by 50% and inflation was also easing, yet global cues and recession fears were clearly seen among investors. All the other mentioned factors along with FII selling lead Sensex once to the three-year low at 7697.39 and Nifty to the level of 2252.75. From the above-mentioned level Market make a smart recovery due to different steps taken by the Government and the RBI like cut in CRR and Repo rate, easing of ECB norms and tracking global cues etc.
Outlook: Global markets rallied after the US Federal Reserve cut its main policy rate to 1% on Wednesday, 29 October 2008 to stave off the credit crunch. China reduced rates earlier on Wednesday, 29 October 2008 with Taiwan and Hong Kong following up with rate cuts on Thursday, 30 October 2008. The Bank of Japan announced a 20 basis points cut in interest rate on Friday, 31 October 2008. Following the suit, RBI also has announced 100 basis point cut in CRR, 50 basis point cut in Repo Rate and 100 basis point in SLR in addition to the measures taken by Indian Government and RBI before monetary policy review on Oct 24. On the other side, inflation has continued coming down for third week consecutively and it was estimated 10.68% in the week ended on Oct 18. All these measures will surely boost the positive sentiment of the investors. Concerns about corporate results will continue to haunt investors. India Inc's report card for the September 2008 quarter so far shows a dismal performance. Aggregate results of 1401 companies showed a 20% fall in net profit on a 32.6% increase in net sales in Q2 September 2008 over Q2 September 2007. But following steps of the RBI, Banks will start providing funds to companies at a cheaper rate (expected in the near term) that in turn may boost the confidence (and expansion plan) of corporates and that of share market as well. The sectors expected to perform well are Banking, Auto, Oil PSUs, Metals and Realty. Finally, the fear of recession is not over and how long the confidence and positive sentiments built on the various steps of the Government world over will last is factor that will decide the movement of the market in the near term.

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