Indian stocks ended an eventful week in style on Friday. Domestic benchmark equity indices, after a week-long correction, rallied to record their highest single-day gains in absolute terms, amid strong global cues that followed a surprising 75 basis point rate cut by the US Federal Reserve.
While the benchmark Sensex of the Bombay Stock Exchange galloped 1,140 points, or 6. 62 per cent, to end at 18,361.66 points, the wider Nifty of the National Stock Exchange jumped 350 points, or 6.95 per cent, to end the week at 5,383.35 points.
“The markets are looking slightly better. If the Nifty manages to breach and hold on above 5,600-levels, the markets could head higher. A number of positives are expected next week, including a further 25 basis point rate cut by the Fed and the RBI may follow suit. Further, liquidity locked up in the Reliance Power IPO should return to the secondary markets soon,” said Rajesh Jain, director and CEO of Pranav Securities.
Experts said the markets appear to be steadying and the time ripe for investors to do some value buying with a long-term investment horizon.
“After the deep correction, many sectors offer great value buys. However, one should be selective in stock picking and build a long-term portfolio. Interest rates have peaked out and a repo rate cut is expected when the RBI meets, which is good for the markets,” said Gopal Agrawal, head of equity, Mirae Asset Global Investments.
According to analysts, the Sensex has over-corrected compared to its peers and thus could stage a stronger rally in the days to come. Investors could start picking up value stocks in domestic consumption-driven businesses like banking and cement alike.
“Bank stocks have fallen 16-39 per cent in line with the market in general and on fears of the US sub-prime losses hitting Indian banks. We believe these fears are ill-founded. Cement stocks suffered their worst during the recent market mayhem. These shares corrected heavily despite many of then already trading at their year's low. We feel that stock prices have over reacted to the global situation, which is far from having an impact on the performance of Indian cement companies. We believe some cement stocks offer the best value price now,” said Ashok Jainani, VP and head of research at Khandwala Securities.
Leveraged positions should however be avoided brokers said pointing out that there could be bouts of volatility in the market after such a deep correction until stock prices stablise.