Is It The Right Time To Start Buying In Stock Markets?

18 Feb

Posted by Shyam as Opinions

After the recovery of market in 2009, it again fell down in the 2010. This has made the investors think about it over and over again if they should invest in stock market at this point of time. Because fluctuations in market cannot be predicted, no one say about the exactly appropriate time to invest but yet about investing now, it can be said that going for long-term investment may prove to be beneficial. And especially market fell by almost 17% this year and now we are seeing a pullback kind of rally. So here are some of the reasons why we can start buying fundamental stocks for long term investment.

Correction done in the market: In January, there was hike in fuel prices resulting in increase of inflation rates. This has made investors quite nervous and confused about their investments. February as well seems to be no good. In the beginning itself, it brought down Nifty from 6,300 points to 5,200 points including about 15% loss to nine of its stocks. In the market, there has been $2.7 billion withdraw of investment made by the Foreign Institutional Investors (FII) and at the same time $1.7 billion deposit by the domestic institutions into the market.

Quarterly results look good: Even during the break-out, the quarterly results of some companies still show them moving up this year. Companies have managed to stand still even when the inflation rates are on an increasing mode.

New Policy in Budget: Inflation rates, problem for all is anticipated to be keeping on increasing and so may prove to be a golden chance for the government to take steps and make policies so as to achieve success and growth even during the increasing inflation rates. This will also help to manage the accounts.

Valuations look cheap to Affordable: The market is presently 15 times below and so though not cheap but is quite affordable for long-term investors. The market is low but yet there is growth in economy at a rate of about 8%. The needs of people are never-ending plus the increasing population has a lot of people to work presently. Also, the government revenues are increasing day by day.

Things which may turn out to be wrong:

Continuation of FIIs in pulling out their investments: Same as 2008, there are chances for FIIs to continue pulling out their money from the Indian stock market. The reason behind this may be the deflation in fiscal money due to the subsidies of government in oil and fertilizers. And this may lead to problems similar to those in 2008.
Declination in the performance of corporate sectors: The increasing prices may lead to fall in the demands made from the corporate sectors which will hamper their earning. Also, book value of some sectors may go down due to the pressure exhibited by banks due to the inflation which may affect Nifty in a negative way. And if in case, the economic trends go down, the sectors and businesses dependent on it will also move in the declining mode.
Government policies might disappoint: In such situations when the financial and economic condition of the country is in danger, it’s the politicians who are required to take bold and important decisions and form policies so as to handle the situation. There has been such steps taken by the government earlier too and so expected to manage the situation this time as well.