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indian stock markets will bounce back in the coming week.

The weakness in the Indian capital market, caused by factors like high inflation , crude prices,and weak global indications, is not likely to impact its future prospects that continue to be robust in long-term.


Sensex, has dived 11 per cent from the peak of 20,509.09 points in January this year and 13.86 per cent from its all-time high of 21,206.77, as on on January 10, 2008.


The bearish sentiment at the stock marketss is accompanied by a steep decline in inflows from foreign institutional investors this year.

So far this year, FIIs have been net sellers as they have sold equities worth Rs 2,274.10 crore, while last year they had made record investments in the Indian capital market, as per data available on market regulator SEBI's website.


In the year 2010, FIIs had purchased stocks and bonds worth around Rs 10 lakh crore, the highest for a year and nearly one-fifth of their overall investment so far.


But market observers believe that "It's ( FII selling) not permanent. In a downtrend, selling pressure in equities is normal."


FII flows are likely to remain moderate to weak because of the natural tendencies of equity market as an asset class becoming unfavourable with high interest rate regime. Moreover, the recent political and corporate fiascoes has put the FII flows on tenterhooks.


Further, with higher interest rates and unstable commodity prices, Indian stock market would go through big ups and downs ahead.


Corporates would feel the pinch of margin pressure and hence a slowdown in earning and lowering of earning estimates in coming quarters could not be ruled out.


Sector-wise, banking, capital goods, oil refineries, cement and infrastructure would be under pressure owing to inflationary pressure, higher interest rate regime and higher crude prices and under-recoveries.


This week, stock market is likely to carry forward the gains it made last week on the back of enhanced buying by foreign funds amid hopes that blue chips, like Mahindra & Mahindra and Reliance Communications will deliver results as estimated.

The kind of rally the market witnessed on the day of the derivatives roll over and on Friday, it is very likely that it will continue with the trend as foreign institutional investors seem to have gathered confidence in the domestic equity market.


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