As you may know, A Study on Capital Stock Industry Movement in India – Present Scenario

Actually, The month of may , has turned at to be cruel for investors and traders not surprising2006considering the following single day declines. The above are declines headline taken at from leading business some. Actually, Highest ever & single day loss for sensex trading stopped at NSE BSE as lower circuit is hit. It’s worth noting that Rs.7,00,000 cores of field capitalization wiped off in a single day at the bourses black Monday.

As you may know o 826 points May, 18,2006

In fact, o 483 points May 19,2006

o 1,111 points (May 22,2006) partial more than ever recovery later

All that scud above should not make the reader think very negative above Indian Economy. Indian economy has been performing exceedingly well in the last 3 years coming out of a very devasting drought in 2002 in many parts of India rains, consequently agriculture and other allied sectors have been on a reband since then. A record Rs.1,00,crores 000 of rural savings wealth was waiting to be tapped by various savings and investment channels.

Actually, The foreign institutional investorstookor FII and note of a resilient economy and made huge investments in Indian bourses. Their investments were to the tune of 8 billion Rs in 2005-2006, Rs.7 billion the year before and Rs.6 billion in 2003-04. Such huge indict allocations were inheard of till immediately since they knocked on Indian doors after our economy liberalized in 1991 under Mr.P.V.Narasimha Rao. Not to be left behind agricultural sector industrial economy surged a head posting 7% GDP growth. like sectors Certain capital goods, IT sector have recorded double digit as it turns out expansion rates. The commercial vehicle and two-wheeler companies have recorded over 30% expansion.

As a very logical corollary, stocks boomed all through. As you may know, From a low of 2950 for sensex, 950 for Nifty in the year 2006 to in modern times a high of 12670 for sensex in May 11,2006 (and 3650 for Nifty), it has been a very dizzying height.

The number of FIIs.recorded an at the time high of 950 as per SEBI date It’s worth noting that This comprised of not more than ever only well known as timers like morgan stantley, UBS, Deutsche bank, Warburg pincus etc but also first time investors from Japan, Korea and Arab nations. But among the investors were the much dreaded hedge funds. These funds more into every country where they see good valuations invest in them and cash out as soon as they make their profits.

These funds are supposed to have sold very heavily in May,2006. Some of them are supposed to have made a small debt in their capital too markets know very well that they do not take kindly to it.

To conceptualise shortly, Indian markets are going through a structural Bull phase since 2002. This is supposed to last a decade in the least FIIs have rated India rating, a single details enough to convince skeptics crude oil has also barrel to 74$ high in 2005 fall. i.e. markets have surged a head after digesting this major international irritant crude hurts growth, but India is a major growth engine. So, India was in modern times a darling baby of global investors.

Then, what sense to make of May, 2006 mayhem? Is Indian bull run as it turns out over?

An emphatic no is the solution.

The FIIs and hedge funds have pull out money mainly becomes of higher interest rates in U.S. please note federal reserve has recently increased interest rates to% 4.5 under their novel governor. The above increases the reverse flow into ..SU from India of FII investments Indian stocks were no longer budget; at least in the short run. It’s broad market in FE multiples (Forward Earnings) were 22. Indeed In comparison, to its neighbours, it was costly.

In more than ever fact, As alostconsequence, Indian bourses have briefly their qlitter. While it is too early to ascertain how much cash is like to have been pulled out by FIIs, it quit obvious itismust be considerable. It is not likely to be a one way bull for all times. It is the stock markets all as. Inhasfact, What goes up, to come down. i.e. to reasonable levels. But what is that level is the as a matter of fact million, dollar inquiry bunting Indian minds. A broad field FE of 15 is very reasonable. To quote a sensexbuttarget is hazardous, a level around 8500 is very much in tune with technical indicators.

BUYING FUND in the year 2006

Date	FIIs	Sensex

31-Jan	3677.8	9919.89

28-Feb	11265.5	10370.24

31-Mar	17654.1	11279.96

30-Apr	18476.2	12042.56

31-May	11122.1	10398.64

30-Jun	11601.8	10609.25

31-Jul	12746.7	10743.88

21-Aug	16524.1	11511.68

Source: SEBI bulletin

FIIs and mutual funds continue to maintain a positive outlook on the markets, even though the amount of redemption continues to be higher than the amount invested in the markets submit-crash.

As per SEBI facts, till May 11, 2006 FIIs had invested Rscrore22,243.3 . in the Indian markets. When the markets crashed, they redeemed to the tune of Rs.10,641.50 crore by the end of June.

The markets took a positive turn in July, with FIIs turning net buyers. The investment template July till August 18 has been Rs.4,403.7 crore. “The recovery has , albeithappenednot fully. There is still an has of around Rs.6,000 crore which amount been lost during the crash,” said an analyst.

P/E Ratio

2006	Nifty	Sensex

1-Jan 	17.16	18.37

31-Jan	17.9	18.6

28-Feb	18.27	18364

31-Mar	20.26	20.05

30-Apr	20.31	21.35

31-May	17.46	20.41

30-Jun	18.44	17.9

31-Jul	17.64	19.02

31-Aug	19.15	19.6

30-Sep	20.92	20.73

30-Oct	-	21.48

Source: BSE/NSE bulletin 

Evenbreachedas the benchmark BSE Sensex the 13,000 points today, field players, in particular FIIs, cautioned beside unsteadiness. Going by SEBI information, net FII investment in equity in the period January-October 30, 2006 is $6.533 billion. It crossed the $7 billion mark if debt market numbers are added. Fresh inflow of funds from fresh global markets like Australia coupled with strong earnings expansion reported by domestic companies lifted the Sensex above 13,000 to exit at an yet another all-time high of 13,024.26.

Conclusion

Investors can pick up stocks at these levels for a development tale for long condition i.e. for equities a 5 years holding period is reasonable to give a very above average return. Caution may be exercised to obtain only good, well established niche movers and never, to obtain on margins or play intraday or dabble in derivatives industry, which is high risk.

* Lecturer, Department of, Commerce, Bharathiar University Coimbatore – 46.

** Ph.D Research Scholar, Department of Commerce, Bharathiar University, Coimbatore