Ignore Atmospheric Chaos, Stick To Fundamentally Strong Stocks
The shoppers enjoyed the big sale offers on the e-commerce platforms and packed their carts with number of products. Meanwhile, there was one bigger sale on offer and this was on D-Street. After the sell-off witnessed post the Union budget announcement, wherein market participants saw number of stocks fall off from the cliff and were up for grabs at a bargain price. However, the market participants were not too excited about this sale. The reason for this is that, while the market tends to veer between two extremes, namely, fear and greed, right now the dominant emotion appears to be confusion. This may seem strange as the domestic markets hit a hat-trick of gains on Wednesday and the US markets recently logged all-time high levels. Despite the upward march, the advance-decline ratio of the markets has been a concern as only a handful of stocks are seen participating in the rallies and the upmove has been at snail's pace. Therefore, investors are quite confused as the earnings results announced till date are uninspiring. Contributing to the confusion, the IMD said that the monsoon in the country was 20 per cent below average for the week ending Wednesday. Moreover, President Donald Trump said an agreement with China on trade tariffs had a long way to go. Also, the FII investors have been withdrawing funds and have emerged as net sellers in the month of July till date.
Amidst all the above concerns emerged a silver lining in the dark clouds in the form of the amendments to the bankruptcy law. In order to speed up resolution and plug the loopholes, the Union cabinet cleared major changes to the Insolvency and Bankruptcy Code (IBC). The amendments seek to enforce a strict time limit for dealing with distressed companies, clarify the rights of all types of creditors and aid in decision-making in the case of bankrupt entities such as property developers, which have a large number of creditors, including home buyers.
The investors are stuck up in a confused state of mind, not knowing whether or not to press the buy button and accumulate stocks in the recent dips or press the exit button as things could worsen further. Given that most of the negatives have been discounted in the price and the Nifty has not slipped below the gap area of the July 20, we would advise investors that it is just a matter of time that the markets start picking up the bullish momentum and the short sellers press the short covering button. Now, what could be the pleasant surprises that could flare up the bullish sentiment in the markets? Oil prices have slipped to $57 a barrel. Also, with China’s economic growth plunging to its lowest level in nearly three decades, there is a hope of a stimulus package out of China. The chief of Federal Reserve can play a Santa Claus as investors are pinning considerable hopes on interest rate cut after his recent comment that the Fed is worried about the economy and would act as ‘appropriate’ to sustain the economic expansion. We can, therefore, sum up that a new trend will emerge and smart investors will be able to catch them. But at this moment, confusion is ruling the roost. For a long term investor, it is a reminder to ignore atmospheric chaos and stick to fundamentally strong stocks.
