Has the Bull Returned to the Indian Stock Market?

The first 6 weeks of 2012 have been nothing short of AWESOME for the Indian Stock Markets. Since the Inception of the new year 2012, the Indian stock markets have grown by double digit %'s. A double digit growth in one year is considered great, but a double digit growth in less than two months? Thats great news isn't it?

This post is about, what caused this bull run and an outlook, as to whether the bull will continue to run amock or will it be Tamed by the All-Powerful Bear...

Shall we get down to business?

Note: All Numbers are as of Feb 15th 2012. The numbers may not match the live/current Market values.

How much have the Indices Gone up Exactly?

The Exact Numbers (In %) by which the various major Indices in India have gone up are as follows:

1. BSE Sensex - 18%
2. Nifty (NSE) - 20%
3. BSE Midcap - 26%
4. BSE Smallcap - 27%

What Caused this Sudden Bull Run?

Well, there are multiple reasons for this sudden (but, good) Bull Run. They are:

1. Foreign Institutional Investors (FIIs), who stayed away from the Indian Markets last year, made a triumphant return. Nearly 23,000 Crore Indian Rupees has been invested in the Indian Markets by the FII's in the first 6 weeks of 2012. This has been one of the key driving factors behind the bull run

2. Better Economic Data from the US and easing Euro-Zone debt worries have brought some relief to global investors. The Uncertainty towards the global economy has come down and the prospects of recovery/growth are looking bright

3. The Domestic Economic Scenario too has been very positive in this time period. The CRR Rate Cut in January, a possible rate cut in March, Stabilizing Inflation Rates, Good December Quarter End Results by Major company's etc have been contributing factors to the bull run

Will this Bull-Run continue?

Well, there is no clear-cut answer to this question. If my life depended on this question, my answer would be

"I think so. There is 70-30 kind of probability for the Bull to Continue Running and for the Bear to bring the Bull to a halt"

Nonetheless, the following factors may directly influence the continuation of the bull run or the return of the bear...

1. The Results of the Ongoing State Elections & the Union Budget that is expected in March will be key drivers to the Market Movement
2. The tensions between European countries & Iran over crude oil supplies may cause the crude oil prices to explode. If it happens, it may have a direct bearing on the Market
3. FII's have been net-buyers so far and their continued support or pull-back may have a significant effect on the Market

With the possible Greece Sovereign Default out of the way, the chances of any major global economic downturn are significantly low. The European Union seems to be on a road to recovery and the economic scenario in the US looks positive as well.

All said and done, the stock market can be expected to be volatile. There will be no clear-cut Bull Running Wild kind of scenario. Investors try to book profits whenever they see the markets move-up. So, such profit bookings may drag the market down in the short-term (A few days of downward movement). Even after such corrections, the market can be expected to get back on its feet and continue the upward movement.

So, all in all, the overall outlook for the Indian Stock Markets is positive over the next few months. The chances of any major/drastic market corrections (downfall) are low and the outlook & investor sentiment will continue to be positive.

How should we Invest in Such a Situation?

This again is an extremely tricky question. If you ask me, I would suggest the following:

Fixed Income Instruments: 60%
Equity Mutual Funds: Around 30%
Equity Shares (Direct Stock Holdings): 10% or less

Tracking the Market and identifying buy/sell timelines is very difficult in such volatile market scenario's. Unless you feel, you can enter or exit a stock at the right moment, I would suggest to take Equity Investments through the Mutual Fund Route. Afterall, experts are always better at this and most importantly, that is what they get paid for. Don't they?

Aren't you Curious to ask me, Why I suggested the above Investment Mix?

Well, any investment decision needs to have a Justification. The Justification for my decision (outlined above) are as follows:

1. The Interest Rates offered by Fixed Income instruments like Bank FD's, Bonds and Corporate FD's are in the double digit. On any given day, any returns of over 10% is very good and if the returns are guaranteed, then it is all the more better. That is why I have given a 60% weightage to debt instruments.
2. Equity Markets though will be positive, will also be choppy. Predicting the movement would be very tricky, even for experts. That is why I have given a less than 10% exposure to direct stock investments and a 30% to Mutual Funds. Picking a well performing Mutual Fund is half the battle won. The fund manager will fight the rest of the battle for you.

If you are wondering, what the best Mutual Funds would be, to Invest right now, just wait until the next post. The next article is going to be on the top performing Mutual Funds which you can invest in. To read that post Click Here


Happy Investing!!!

Company’s that Comprise the NSE Nifty

The NSE Nifty or Nifty as it is more commonly called is one of two premier Indices in India. It is the index that depicts the movement of the National Stock Exchange or NSE. In one of our earlier posts, we had taken a look at what the NSE is. To read that post, “click here”.

In this post, we are going to take a look at the 50 company’s that comprise this Nifty Index.

To Recap:

Nifty is the weighted average of the price movement of the 50 largest company’s that are listed in the National Stock Exchange. This list of company’s may change from time to time and the Exchange will always release the news of replacement of any company in the Nifty to the public beforehand.

Below is the list of 50 company’s that comprise the NSE Index along with their Industry and Weightage.

Note: A company with 1% weightage will have to increase twice as much as one with a 2% weightage in order to move the index up or down by the same number.

Company Name	Industry	Weightage
ACC	Cement - Major	0.64
Ambuja Cements	Cement - Major	0.71
Axis Bank	Banks - Private Sector	1.18
Bajaj Auto	Auto - 2 & 3 Wheelers	1.26
Bharti Airtel	Telecommunications - Service	3.87
BHEL	Engineering - Heavy	1.99
BPCL	Refineries	0.56
Cairn India	Oil Drilling And Exploration	1.95
Cipla	Pharmaceuticals	0.83
Coal India	Mining/Minerals	6.62
DLF	Construction & Contracting - Real Estate	1.02
Dr Reddys Labs	Pharmaceuticals	0.86
GAIL	Oil Drilling And Exploration	1.44
Grasim	Diversified	0.69
HCL Tech	Computers - Software	0.84
HDFC	Finance - Housing	3.06
HDFC Bank	Banks - Private Sector	3.35
Hero Motocorp	Auto - 2 & 3 Wheelers	1.09
Hindalco	Aluminium	0.78
HUL	Personal Care	2.58
ICICI Bank	Banks - Private Sector	2.77
IDFC	Finance - Term Lending Institutions	0.48
Infosys	Computers - Software	4.52
ITC	Cigarettes	4.92
Jaiprakash Asso	Construction & Contracting - Civil	0.39
Jindal Steel	Steel - Sponge Iron	1.43
Kotak Mahindra	Banks - Private Sector	1.07
Larsen	Engineering - Heavy	2.19
Mah and Mah	Auto - Cars & Jeeps	1.3
Maruti Suzuki	Auto - Cars & Jeeps	0.86
NTPC	Power - Generation/Distribution	4.18
ONGC	Oil Drilling And Exploration	6.77
PNB	Banks - Public Sector	0.86
Power Grid Corp	Power - Generation/Distribution	1.44
Ranbaxy Labs	Pharmaceuticals	0.6
Reliance	Refineries	7.3
Reliance Comm	Telecommunications - Service	0.55
Reliance Infra	Power - Generation/Distribution	0.33
Reliance Power	Power - Generation/Distribution	0.76
SAIL	Steel - Large	1.16
SBI	Banks - Public Sector	3.44
Sesa Goa	Mining/Minerals	0.49
Siemens	Electric Equipment	0.75
Sterlite Ind	Metals - Non Ferrous	1.06
Sun Pharma	Pharmaceuticals	1.62
Tata Motors	Auto - LCVs/HCVs	2.02
Tata Power	Power - Generation/Distribution	0.7
Tata Steel	Steel - Large	1.22
TCS	Computers - Software	6.48
Wipro	Computers - Software	3

The list above is ordered Alphabetically based on the company name :-). Also, the list above is correct as of 15th January 2012. If there are any updates to the Index, I will try to update this post accordingly...

Stock Exchanges in India

A Stock Exchange is the place where investors go to buy/sell their shares. You know what an Equity share is. Pls refer to Equity Shares for more details.

Once a company's public offering is complete, it gets listed in a stock exchange. After listing it would be available for trading to all investors in the stock exachanges where they are listed. In India we have two major stock exchanges. They are:

1. The National Stock Exchange (NSE) &
2. The Bombay Stock Exchanges (BSE)

National Stock Exchange:

The NSE is India's largest and the worlds third largest stock exchange in terms of Transaction volumes & amounts. The NSE is based out of Bombay. The NSE has set up its trading platform as a nation-wide, fully automated screen based system. This enables anyone in any part of the country to trade on shares listed in the NSE.

The NSE is based on a demutualized model wherein the ownership, management & trading rights are managed by three different group of people. This is to ensure that there is no conflict of interest among the stake holders.

NSE was set up with the objectives of:

1. Establishing a nationwide trading facility for all types of securities
2. Ensuring equal access to all investors across the country through an appropriate telecommunication network
3. Providing fair, efficient & transparent securities market using electronic trading system
4. Enabling shorter settlement cycles and book entry settlements
5. Meeting International benchmarks and standards

NSE Index or NIFTY:

The NSE Index or the Nifty Index as it is popularly known, is the index of the performance of the 50 largest & most profitable, popular companies listed in the index. Each company that is part of the index has its own weightage in the value of the Index. The value of the Nifty Index is the weighted average of the prices of these 50 companies.

To know about the 50 company's that comprise this Nifty Index "Click Here"

Bombay Stock Exchange:

The BSE is the oldest stock exchange in Asia. It is situated in Dalal Street in Mumbai. It is the third largest stock exchange in south Asia and the tenth largest in the world. BSE has over 5000 companies that are listed in it. The objectives of the BSE are similar to that of the NSE. BSE also uses the latest technologies in the IT field to provide a single place where traders from across the world can buy/sell shares in the Indian share market.

BSE Index or SENSEX:

The BSE Index or the Sensex as it is popularly known, is the index of the performance of the 30 largest & most profitable, popular companies listed in the index. Each company that is part of the index has its own weightage in the value of the Index. Since the number of companies is lesser, the index variations are higher when compared to the Nifty index.

To know about the 30 company's that comprise this Sensex Index "Click Here"


Hope you got a basic idea about the two major stock exchanges in India. Happy reading...