Markets on Stabilization mode ?

Slowly and steadily the markets are recovering from the May Meltdown
The Indian stock markets are on the silent move. Slowly and steadily the markets are moving out of the shadows of the May and June meltdown. If we take a look at the movement of Nifty from the month of May till August, it gives a clear idea of how the markets have moved from the levels in June Beginning to the current levels. The chart below indicated that markets are stabilizing themselves at current levels and this may be beginning of the revival of sentiments on the bourses. But wait, don’t jump to the conclusion that everything is perfect and markets are set to take off to the high levels seen earlier. Lets see how the transition from May fall to consolidation took place.
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The fall was democratic
I can make out some minds pondering over why I am calling the fall as democratic. Most of us believe that the fall was an excellent example of how markets can behave autocratically and wipe out all the gains and make even the experts feel helpless. The democracy that I am highlighting in the fall was that the mayhem was spread across the length and breadth of the markets and didn’t spared anyone.
So what’s new about this ? Everybody know that. Of course, yes, but the aftermath of the fall unfolded into an altogether separate course of action.

The savior
Though the fall was democratic, the same was not true of the Recovery that the markets made since June,2006. So who were the saviors of the markets ? If you study the comparative movements of the various indices , you woul come to know that it was the IT sector which really helped the markets recover at a faster pace than rest of the sectors. If we go by the market capitilisation, it were the large cap stocks which had lead the recovery.

Has the Investor Confidence Revived ?
Not Exactly, I am not sure how many Investors have really used the meltdown to invest further into equities. The reason was obviously the way the markets came down shaking the whole edifice on which the Investors were pouring money to stock markets. But there are some signs of a slight recovery of Investor confidence. One example is the recent success of the GMR and Tech Mahindra IPO’s. After the drastic performance of IPO’s in last two months, the investor response to these IPO’s certainly tell a story of a confidence revival though at a slower pace.

Quarterly Results lended helping hand
The current recovery in the markets was not possible if the quarterly results wouldn’t brightened the otherwise cloudy markets. Stunning performance by India Inc. helped markets to regain its lost strength. This helped the recovery to spread from large cap to select madcap stocks which turned out excellent set of numbers.

What lies ahead ?
Since the results season is over, there are no major short term triggers left for the markets to take guidance from. Going forward the markets would continue to remain range-bound at current levels and stock specific performance would be more visible. Still, there are no clear cut signals of markets moving only northwards. Investors are advised to maintain a cautious approach and choose stocks only on merit. It’s very important for the markets to consolidate at current levels in order to move ahead in coming months. If the markets are unable to hold on to current levels, it would take a larger time frame for Investors confidence to revive. The current movement has come with lower volumes and this clearly indicated lack of participation in the markets. So keep a watch on the volumes front . Long term Investors can be assured of good days ahead for them as the economic indicators are showing good signs and India remains on the forefront of the fast growing economies.

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