While
we have kept the title of today's closing commentary same as on 30th
September 2008, today's 'oh' suggests a sigh of relief when compared to
that of last September when the world economy and stockmarkets were in
extreme fear. Lehman Brothers had just gone bust then, and there was
fear that many others would follow suit. That did happen! Companies
around the world - big and small - went bankrupt one after the other.
Some went bust due to cash crunch, and others could not survive a
collapse in demand for their products and services.
Around
110 banks in the US have closed down since last September. And another
43,000 companies have filed for bankruptcy. Unemployment has been on a
rise around the world. Consumers have drastically cut down on their
spending. Subsequently, western economies have gone into recession
while those of emerging markets like Brazil, Russia, India and China
have seen their growth taper down.
However,
this was not worse enough to have led the stock markets into a sustained
crisis, as seen from the sharp rise in stock prices since March 2009.
As we stand now, investors across the world are hoping for an economic
recovery and improvement in corporate earnings, all driven by easy and
cheap cash infused by central banks in the name of bailouts.
Investors in India are no different! From the depths of despair
that were seen till the first week of March, investors (and speculators
alike) have been euphoric on stocks. The BSE-Sensex, for instance has
risen by around 110% since March lows. Mid and smallcap stocks have
done even better during this period with the BSE-Midcap and
BSE-Smallcap indices surging by 148% and 165% respectively during the
same period.
The
euphoria doesn't seem to be stopping! We saw today the Sensex
retouching the 17,000 levels, which was last seen in May 2008. Around
US$ 10 bn of FII money has already flown into Indian stocks in 2009
till date, much more than what went out in the whole of 2008. Corporate
earnings are expected to improve during the July-September quarter. In
simple terms, investors seem to be back in the business. And so have
speculators, who seem to be buying anything and everything available on
the stock exchanges. Or what would justify some worthless companies
moving up by 3 to 5 times within a short span of past six months?
For you, dear reader, our suggestion is simple. Keep investing in good quality stocks while keeping a close eye on the fundamentals
of the companies you invest in/are looking to invest in. Never pay more
than what you believe is the true value of a business. And do not sleep
at night with stock quotations in your mind.
Anyways,
the BSE-Sensex and NSE-Nifty has closed today with gains of around 270
points (1.6%) and 70 points (1.5%) respectively. The BSE-Midcap and
BSE-Smallcap indices have ended up by around 0.9% each. Top gainers on
the BSE-A group include Bharat Electronics, Axis Bank, and Maruti. On the other hand, FMCG stocks like GSK Consumer, Marico, and Dabur were among the biggest losers.
Among
other key Asian markets, while China and Japan closed marginally up,
selling was seen in Hong Kong and Korea. European stocks have opened in
the positive. Gold is trading a tad above US$ 1,000 an ounce, up around
US$ 9, in the international markets. The Rupee was trading at 47.82 to
the US Dollar at the time of writing.
