Morgan Stanley might remind you of the infamous analyst, Andy Xie who came on CNBC TV 18 and announced that the party on Dallal Street is over – India was headed towards BEAR MARKET for the next 18-24 Months. And we are now seeign the sensex at 11,900 levels again.
Last month JP Morgan downgraded India and I told you folks to “just ignore it“. Morgan Stanley has taken a “U” turn and is now raising India’s GDP forecast from 6.8% to 7.6%. It is very likely that India will outperform Morgan Stanley’s expectations.
Last month we saw FII inflows of around $1 Billion(Rs4,5oo crores) Cheers!!! Individual FII investors will have different views and they keep reshfulling their portfolio.
Case Study for Market Behavior:
For example consider the Satyam stock which is regarded as a favorite amongst institutional investors. Satyam around Rs800 trades at a discount of 20 for its 2007 earnings while Infosys and Wipro trade at 30 for their 2007 earnings. When institutional investors are buying the stock, it moved up ir-respective of the direction of sensex and nifty. When the buying stopped, it lost its momentum and went into correction phase.
Why some are buying and some are selling ?
Satyam doesn’t maintain consistency in its earnings which is the hot favorite parameter to measure the stock amongst Fund Managers here. Observe last 8-12 quarters and it is evident.
Some fund managers argue that Satyam will touch $1 Billion in revenues this year and that is a very important mile stone to bag larger orders. They further think that company will not only be consistent for next 4-8 quarters but it will grow and hence they are buying. Some argue that it is hard for satyam to touch the Billion dollar mark but they are just holding to test its performance for next quarter.
In this way individual stock will get re-rated or downgraded and FII money will continue to flow into Indian equities. If you can hold stock for the next 3 to 5 years, then BUY any fundamentally sound company you will make money. Else take my advice and go for SIP investment in mutual funds.