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Monday, March 16, 2009

Long-Term Investing Should Be Put On Hold

Should you buy stocks for your long term investing now? Let's have a look at current stock market situation, how markets across the world are moving and where do Indian Stock market stands.

The market bounced back strongly last week, with the BSE Sensitive Index finishing 5.17% or 430.79 points higher and the Nifty ending 3.78% up. The CNX Midcap Index made a smaller gain of 2.33%. Tata Motors was the biggest winner among the index stocks, registering a gain of 16.7%. The other index stocks that went up included ICICI Bank, Sterlite Industries, HDFC and Maruti Suzuki, with gains between 14.6% and 9.7%.

Bharti Airtel was the largest loser among the index stocks, shedding 7.2%. The only other index stocks to go down were NTPC and Ranbaxy Laboratories, which saw losses of 3.8% and 2.0% respectively.

Vishal Information Technologies was the biggest winner among the more heavily traded non-index stocks, rising by 28.9%. The other non-index that went up included Akruti City, Bombay Rayon, Sintex Industries, Educomp Solutions, Axis Bank, Aban Offshore and Tata Communications, registering gains between 20.8% and 9.8%.

Edserv Softsystems was the biggest loser among the more heavily traded non-index stocks, with a 30.5% loss. The other non-index stocks to go down included Rolta India, HPCL, BPCL, Tata Teleservices, IOC, Zee Entertainment and Mercator Lines, which saw losses between 12.3% and 5.5%.

INTERMEDIATE TREND
Most global indices also rallied and entered intermediate uptrends last week. Our market’s intermediate trend is still down, but is likely to turn up with a global intermediate uptrend having apparently started. Buy stocks with utmost cautiousness.

The BSE Sensitive Index has to cross 9,000 for a confirmed intermediate uptrend. The corresponding level for the Nifty is 2,800 and that for the CNX Midcap is 3,235.

LONG-TERM TREND
The market’s long-term trend remains down. The sensitive index has been in a 3,300 point range between 7,700 and 11,000 since the end of October and has not had any clear sequence of rising or falling intermediate tops or bottoms since then.

It would therefore be safe to treat 11,000 as the level to cross for a bull market confirmation. The corresponding Nifty level is 3,250 and that for the CNX Midcap index is 4,000. (Figures have been rounded upwards).

Almost one in ten of the more heavily traded stocks were already at two-month highs at the end of last week and a few stocks have gone above their 200-day moving averages too. These could be the first signs that the bear phase is ending, but there is still quite some work to be done.

TRADING & INVESTING STRATEGIES
The intermediate downtrend has almost certainly ended and long-term investing should be put on hold until the next intermediate downtrend. It will be a good idea to hold on to past and recent investments and not get out of them as the rally progresses.

This portfolio building exercise suggested over the past few months was simply to buy stocks at low levels and not in anticipation of an early end to the bear market, even though this could happen sometime soon.

GLOBAL STOCK MARKET PERSPECTIVE
The major trends of all global markets remain down, but the intermediate trends of most markets turned up last week.The BSE Sensitive Index had lost 45.7% in the twelve months that ended on Thursday, up 5 positions to the 22nd place among 35 well-known global indices considered for the study.

Chile continues to head the list, though with a 14.5% loss. South Korea, Malaysia, New Zealand and Slovakia follow. The Dow Jones Industrial Average has lost 41.0% and the NASDAQ Composite lost 37.0% over the same period. (These rankings do not take exchange rate effects into consideration).
Source: EconomicTimes.com

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