The battle between bulls and bears seems to be entering a decisive stage this week. According to 'Fundamental' stock market theory, our stocks are at reasonable valuations and cherry picking can be done in fundamentally sound stocks with a long term perspective. However, based on the 'Technical' analysis there is still a downside to the markets. How much is the downside, its a house divided. The news from the inflation front accross the globe is not positive. India's WPI infation index has reached close to 6% (5.92%) for the week ended 8th March '08. American markets have reacted positively to the 0.75% rate cut announced by the Federal Reserve last week. Liquidity position of Indian markets is good, Mutual Funds are sitting on cash worth Rs.15000 crores. LIC and other institutions have also mopped up huge funds. All this is waiting to be invested in the stock markets.
This week could seee a decisive trend in Indian markets. Close to the March series expiry (F&O segment) on Thursday 27th March, the market is likely to create a panic bottom and thereafter should give a decent recovery. The market could recover anywhwere between 61% to 75% of its fall from the peak level touched in January. For example, if the BSE sensex falls to 14000 (a fall of 7200 points from its peak of 21,200) it could bounce back to 18300 or above within the next 2-3 months.
The market at these levels offers an excellent long term investment opportunity. The month of April will be excellent for the markets, given the anticipation of good earning numbers by Indian Corporates.
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