Sensex melts on selling spree; down 289 pts.

FII's play spoilsports, mutual funds save the day
The Indian Stock markets witnessed a selling spree this week resulting in the Sensex melting by 289 points. Heavy selling was seen from FII's who chosed to book pofits in the month of October to inflate their books and bank on good bonuses for the year-end party.


What has changed for the markets ?
Few new scenarios have come into picture. First and foremost is the talk about reallocation of FII funds to the emerging markets in the month of January. The street is aloud with the news that FII may reduce their allocation in the Indian markets and move some money to other markets such as Japan.
However, from the fundamental perspective, nothing has changed in the Indian story. The Q2 earning season started on a good note with Infosys increasing its guidance and outperforming the street expectations. However, the judgement in Lipitor case went against Ranbaxy and bought doom to the pharma scrips.

Mutual Funds: What are they doing ?

Mutual funds remained net buyers and helped the sensex to save itself from further meltdown. The reason being that some of the mutual funds have garnered huge subscription from their recent offerings and they have to invest the same in the Indian equities. Mutual funds are using these dips to enter at better levels.

Who are worst effected?
Those investors who have invested in equity markets in last two months are the worst effected from this meltdown. However those who are invested since last 6 months are quite better off though they too had dint in their profits

Has the long term outlook on India Changed ?
Absolutely not. Though the markets may see some more downfall before moving up, the long term scenario of strong bullish sentiment still remain intact.

Advice to small Investors
Investment Guru advice the investors not to panic under these situations. This is an outcome of the liquidity movements and hence will not impact the long term investors. When the FII's do the reallocation in Janaury, Indian markets will again see huge buying from them.
Investors are advised to have a long term outlook while buying stocks. Those who are sitting in cash are advised to use such dips to slowly start buying in stocks which have good fundamentals but are battered by this meltdown.
Investment Guru blog will continue to guide you in your journey to Investing.

Happy Investing !