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Time To Risk It
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The wait is finally over for C.J. George, managing director of Geojit BNP Paribas Financial Services, who, for the past one month, has one-point agenda for his investors: “start taking risks”. Despite sustained inflows (in the first nine months of 2012, foreign institutional investors, or FIIs, have invested close to $16 billion in Indian equities) into the equity markets, the lack of confidence had seen investors staying away from participating.
“Apart from the lack of reform initiatives, issues related to corruption, scams and scandals...was the reason why we had asked investors to stay away from the markets,” says George, who is banking on feel-good factors like the government’s proactive behaviour and resolve to not go back on the reform process, when “advising investors to start making some investments in the equity market”.
Measures announced by New Delhi to open up the investment window and global liquidity — FIIs invested
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close to $3.5 billion last month — helped the BSE Sensex gain 8 per cent in September. Sensex gained over 1,300 points, inching close to the 19,000 mark after hovering in a range of around 17,000–17,500 for the past two months. The rise in the market was across the board but the gain in the banking stocks that account for nearly 30 per cent of the Nifty helped it outperform the BW Experts Index (BWEI) and the BW Dartboard Index (BWDI) in September. Nifty gained nearly 8.5 per cent, compared with a 6.7 per cent gain in the BWEI and 4 per cent rise in the BWDI. The September gain has helped Nifty record a return of 23.3 per cent in the first nine months of 2012. (See graph: Nifty leads BW Expert and BW Dartboard Indices.)
In fact, higher weightage of Tata Consultancy Services (TCS) in the BWEI and BWDI was responsible for pulling both the indices down. On the back of profit booking, TCS lost nearly 4 per cent in September. Last the stock was up close to 9 per cent. One of the reasons for the underperformance of the BWEI in the past two months has been the impressive performance of Reliance Industries (RIL) and Hindustan Unilever (HUL). Both these stocks aren’t a part of the BWEI. In September, RIL that accounts for 8 per cent of the weightage in the Nifty was up 8.5 per cent, while HUL (accounting for 3 per cent) was up 5 per cent.
Meanwhile, the rise in stocks like Bank of Baroda (up 26 per cent), State Bank of India (up 21 per cent), Larsen & Toubro (up 19 per cent) and Mahindra & Mahindra (up 13 per cent) helped the BWEI make decent gains in September. Apart from TCS, the only other stock that lost last month in the BWEI was Bharat Electronics, down 3 per cent. (To see the expert picks and returns, visit www.businessworld.in).
“It’s crude but it is true — until retail and Indian institutions don’t participate, the markets remain firm. Today, both are not there in the market,” says George, adding that unlike global investors, the “Indian capital is conservative and waits for all indicators to be positive before entering the market”. “Today Delhi and global capital are in favour of India and, therefore, I see the upward momentum continuing,” he adds.
Market experts like George have turned bullish while banking on the changing winds in the equity markets, hoping that more investors diving into the markets will help currency appreciation and lower the burden on the oil imports. But as he says, “This is an opportunity to buy, but pick good stocks rather than the speculative ones.” Thus, in short, make sure you tread cautiously.
(This story was published in Businessworld Issue Dated 15-10-2012)