Last week was Diwali and so I did not made any post on the blog and so first Belated Happy and prosperous Diwali and I hope it was safe for you. Now coming back to our investment. As we see on television and you may have noticed the multibaggers stock of last year and specially JSPL which is up by 600% in one year but remember do not fall into the trap of investing in JSPL or stocks which have runup because they can never repeat the performance in the coming year. Follow the basics and try to invest in good companies which have not run up and would do the catching.
Indian market is currently the second best market in terms of year to date return after Chinese market. The Sensex has closed last week with a gain of 207 points and closed at 17233.67. This is the highest closing for the Sensex as on year to date with a return of 49.98%. Advance – Decline ratio is in favor of Advance at 1663 to decline of 1038.
In the sectoral view, the metal pack has gained the most and in that pack, Jindal Steel, Sterlite, Hindalco and Tata Steel all gained more than 5%. In the banking sector, SBI the bellwether gained 5%. The realty pack also gained modestly with DLF and Unitech closing higher by 2% and 4%, respectively. The FII were again a net buyer yesterday with a volume of Rs.1443 Cr and as on date to the year, they are net buyer of more than Rs.2000 Cr. With a good advance – decline ratio and all-round positive news, index may carry forward the gaining momentum till Diwali.
It is here to mention that the Indian recovery is going to be higher in the coming quarters than previously expected and the recently released IIP data also shown that the government’s stimulus packages trickle down effect is started to taking place. This will improve the GDP forecast for the coming quarters and as well as for the whole of 2009 – 10.
The IIP data showed the industrial output rose to 10.4 per cent in August from a year earlier and beaten the median forecast in a Reuters poll. The July’s annual growth was revised up to 7.2 per cent from 6.8 per cent, data showed on Monday. This growth in Industrial output in August is the fastest in the past 22 months and also showed a recovery sign as factories produced more household goods and cars as stimulus spending drove demand. But, as the inflation also started to move northwards with change in base effect, economists said the central bank was unlikely to raise interest rates this month.
In the global arena, the Dow Jones Industrial average has closed yesterday, 13-10-2009, at its highest closing level of 10000 to year to date. The earnings season starts of with a result of above market expectations from JPMorgan which climbed 3.3 percent to a one-year high of $47.16 after posting earnings from fixed income jumped to a record of $5 billion in the investment banking division and this increased the per share earning to 82 cents, compared with the average analyst estimate of 51 cents in a Bloomberg survey. The S& P also closed at its yearly high of 1092.
With this positive news from around the globe, and our own positive IIP data will help our market to stretch further. Even though the PE multiple is trading at a high of 18 times to its trailing 12 months of earning, with our inherent strength of internal consumption coupled with governments positive view on the GDP growth and the Central Bank’s steady monetary policy will all help the Sensex maintain its rally so far.