Stock Market: Present okay, future tense keep bourses on edge

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By S Jha

New Delhi, April 19: Retracement is seen to be a normal market movement. Nifty after rallying almost 100 points has sharply retraced on the back of the IT bellwethers, Infosys and TCS, souring the sentiments. Amid the sharp rebound of 1000 points, it somehow dimmed that the global macroeconomic situations are depressed and the views of the investors are largely short term

Inflation globally is seen to be cooling. Yet, the developed economies aren’t yet out of the woods. The US Federal Reserve continues to keep the investors on the tenterhooks, with more voices leaning on hawkish stance of the central bank of the largest economy of the world.

Depressed economic situations globally are affecting the corporate earnings and margins. The investors don’t reward squeeze in the margins or even the status quo, which appear to be the indicator for the ongoing earning season. This is applying not just to the India Inc but also the US corporate entities. Tesla has bene forced to cut the costs to sell cars. The people are lesser disposable income, and that will certainly have bearing on the direction of the market.

The institutional actions on the bourses also indicate dull phase in the market. The foreign institutional investors reported a net sell of Rs 10 crores in the cash market. Their domestic counterparts sold a net of Rs 100 crores in the cash market. This may be a time to watch out as far as institutional actions indicate.

Even while there is easing of inflation, China under the third term of Xi Jinping is keeping the strategic experts on the edge and the market participants wary of black swan moments. Also, the experts are warning that the US-China tension will add to the inflationary pressure globally, as the global supply chains is now at the mercy of the geostrategic standoff between the two major military powers.

Yet, the stock market is a place which rewards the long term abundantly, and ITC shows why it’s true. The ITC share price was Rs 60 in February, 2009, and it is almost touching Rs 400 – almost seven-fold gain in just 14 years. Also, ITC rewarded the investors with dividends along the journey. The icing on the cake has been that ITC was the least risky bet for any investors. The Dalal Street is full of instances where the stock prices have gone up by 50-100 times. But the power of slow compounder, which has been shown by the likes of HDFC Bank in the past, is clearly demonstrated by ITC.