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Market players feel Sensex has bottomed out

Aravamuthan Sasikant

The market dropped to a low of 3831 points on May 25 and has recovered from there. This level has proved to be a good bottom for the market and it has stayed above this level, at least so far. This is a 37 per cent fall from the peak of 6150 on February 14, 2000 and many stocks have tested their 52-week lows.

This fall has been across the board and all sectors have been affected. This fall has also taken most investors by surprise. Does it provide an opportunity to get into stocks, which a couple of months ago were at dizzying heights? Most fund managers and stockbrokers are of the opinion that the market has more or less found a bottom and one can start investing in small quantities.

The next question is what sectors and stocks should one look at. Even here, there is unity in the investing community. They say the leaders in all the sectors are attractive. A fund manager with a foreign mutual fund says "Stocks are looking good across the board. One can get a good return of about 20 to 25 per cent if he starts investing now with a one year perspective."

But the heady returns of early 2000 are gone. "It will be very difficult to find the same kind of run that one saw in January and February," says S Sankaranarayanan, fund manager, Tata Asset Management.

Abhay Aima, country head, equities & private banking, HDFC Bank, says, "Over the last ten days, the market has been range bound and it appears that it has found a bottom. At the current levels, the market looks attractive."

Aima adds that the frontline stocks, be it in software or cyclicals, will lead the next rally. In software he likes Infosys and SSI. In cyclicals, his pick is the cement sector and in infrastructure, he recommends Bhel and Larsen & Toubro. He says the leaders in all the sectors will go up first.

"The software story is intact and so is the economic recovery story, what with the government targeting a GDP growth of 7 per cent this year," says John Band of ASK Raymond James. He is bullish on the sectoral leaders. He adds, "All the ingredients for a revival of bullishness are there, but markets move between extremes of pessimism and optimism and in the last few days, it has been in extreme pessimism."

Some market players are not sure of the market having bottomed out. Maulik Sharedalal, director, Kaji & Maulik Securities says "At a 5 per cent downside from the current index levels, one can start investing in technology and telecom stocks, which will be a much safer level."

Once the pessimism is cleared from the air, then the markets could start improving and normal monsoons or the first quarter results could be the factors that could trigger the next rally. But money managers suggest that instead of waiting for that, one could start buying into the market gradually as the market starts discounting expectations and the response to news is muted.

Catching the market bottom is impossible anyway so fund managers and brokers are advising investors to start buying now. A foreign fund manager says, "One should invest one-fourth to one-third of his funds now and once the direction is clearer he should invest the rest." But stick to the industry leaders is the unanimous advice.

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