Past is a waste paper, present is a newspaper and future is a question paper. Come out of your past, control the present, and secure the future -
Market status
Nifty has closed at 11,143 yesterday. In fact, it had touched an intraday low of 10,866 before recovering 270 odd points. This is down from a peak of 11,755 on the 28th of Aug 2018. It means that the Nifty has corrected 612 points (or about 5%) in a span of less than four weeks!
Reason for sharp intraday correction
The sharp intraday correction yesterday was triggered by DSP Mutual Fund selling a large quantum of commercial papers of DHFL at a steep discount, generating fears of liquidity crunch in DHFL. The stock fell more than 55% in intraday trade before recovering a bit and closing the day at a loss of 43% for the day! Its closing price of 353 was last seen 18 months ago in March 2017! The fear of liquidity soon spread to other NBFC and HFC stocks, all of which saw bloodbath yesterday and closed in the red.
This sharp correction has created anxiety among long term investors in the stock market, who are now asking whether they should protect their capital and start selling their holdings. All our Clients were already advised to sit on cash, well in advance, in anticipation of this correction
FII/DII activity
FIIs have been net sellers in the stock markets for six straight months. In the month of September they are choosing to buy on dips, although they have been net sellers for the month. DIIs on the other hand have been net buyers for 18 straight months on the back of strong SIP inflows. However, the volume of DII buying has tapered significantly in past three months suggesting that SIP inflows may also be tapering off.
GDP data
Meanwhile India’s GDP figures for the June quarter came in at 8.2% and this was announced at the end of August. This confirms India’s position as the fastest growing economy in the world among all the big volume economies. Consumption led demand and Infrastructure spending continues to be very strong in India. However oil prices and a weakening rupee have thrown a spanner in the works and inflation could be inching up along with interest rates. This In turn may affect the growth rate going forward.
What to Do
Investing is a long term game. As always, the best investing strategy is to invest in companies with strong earnings growth and healthy order book. Any competitive advantage in the marketplace is an additional bonus for the business. This is where our advisory service based on the icTracker software is able to deliver consistent outperformance. Check our backtesting results to see how our model portfolio has outperformed every major index handsomely over the past 10 years!
Happy Investing!
Abhijit Talukdar
Founder, Attainix Consulting
SEBI Registered Investment Adviser - INA000006703
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