Fluctuating Indian Stock Market and Banking Scrips

With the recent fluctuation in the market and the high volatility associated due to global market trends has given rise to quite a few speculations. Various factors including the improvement in US Economy, prolonged Euro Zone Crisis and the most recent FIIs pulling out of Bonds market with the remarks of US Fed chief to slow down the Bond Purchase in US and  slow down the stimulus to the US Economy, all played important roles in the volatility associated with the Stock Market in India.  Domestically also, slowdown in the Domestic Industrial Output again pulled down the Stock Market.  The other factors that seems to be impacting are the fall in the Gold prices and the talk of the Country going under Mild Recession.  All these factors as if were not good enough that now we have an issue of Depreciating Re against major currencies of the world like Dollar, Pound and Euro. This is pegged to touch the highs of 63/dollar and that would mean increased Import Bills and Increased Fuel Prices.  What does that mean – Impending Inflation.  So how is market supposed to behave?

Market are expected to ride a choppy and turbulent wave of highs and lows due to the above mentioned reasons. Since RBI is not intervening at present to control the Depreciating Re we need to look at investing in market only from a long term perspective.  Specifically those looking at the Banking Sector need to be really cautious.  The Banking Scrips are already in negative to some extent and with the further depreciation in Re I would expect the Scrips to lose the Shine further.  Reason being the impact they will have on their Business and Profit Margins. Unless RBI revises the Repo Rate and CRR, Banks would not perform as they are expected by the investors and certainly that would bring down the confidence vested in them resulting in Sell, and Sell mostly by the Institutional Investors. This would result in the downward price trend of the Banking Scrips.

Some Safe Bets in this could be the Banks with Low NPAs like HDFC, BOI, IDBI or similar ones in the rank. However, please do not read this as my recommendation or even suggestion to invest in them.  I am simply talking on the probabilistic terms that these Could be safer scrips than the others.  But again, the selection of Banking Scrips to invest in needs to be done with utmost care and with a mid or long term perspective and with a target hold of minimum 1 year.  I would not suggest a Short term hold on the Banking Scrips and also not at all if you would be afraid of the high volatility that may be associated with the Share market and the Banking
———————
Note- Had to update as Rupee Symbol was not showing up
Update – Re has already touched 60/dollar at the time i revised this article