WEB SPCL: Is it the right time to buy?

The Nifty cash to futures discount is currently running between 15-25 points against the normal monthly average of 50-70 points.

The Nifty cash is currently quoted at 2737 against the futures at - 2711. At 12 noon, open interest in Nifty June futures has increased by whopping 8.2% or by 2.07 million shares. Nifty July futures have also built OI of 22,500 shares. 

It is the right time for investments? The BSE Sensex has lost nearly 3000 points from its high of 12,612 points or nearly 25% while the Nifty has lost nearly 1000 points from its high of 3754.

Markets could test the 9,000 level. Below this level the Sensex P/E will be 15 based on FY06 earnings and P/E of 13.8 for FY07 earnings.

One will never be able to catch the bottom or the top. It could even go further down below the 9,000 levels. However the probability of it going down is relatively low at 25% while the probability of it rising from these levels in the near 6 months is relatively higher at 75%.  

Why markets should go up in the near future. India GDP growth rate remains robust and will be over 7%. The FIIs have commenced buying and it has bought Rs 1200 crore worth shares in cash market in the last three trading days.

During the last 4-5 years, nearly 5 times the Nifty had crashed anywhere between 25-38%. The next month equally it has bounced back by nearly 75-125%. 

With strong GDP growth rates, FIIs commencing buying activities, and 2nd quarter numbers more in line, one could look at the following stocks to commence with ACC, Infosys, ITC and L&T.

ACC is currently trading at Rs 705 from its high of Rs 1061, Infosys trading at Rs 2640 from high of Rs 3400, ITC at Rs 145 (Rs 213) and L&T at Rs 1896 (Rs 2915). 

The selling could be attributed to people who have bought shares on margin funding for cash and futures and option segment. As the equity markets fall, margin calls trigger.

In the event of non-payment, usually the broker or the bank sells his/her 'A' group shares to make for the losses. With host of B1, B2 and Trade-to-Trade stocks hitting the lower circuits during the past 7-10 days (losses anywhere between 25-50 per cent and no exit). Selling in 'A' group is currently being witnessed. So, make the best opportunities from these falls.