Prune your expectations

MARKET RESEARCH IMPACT

It was a disappointing week for equity investors. The markets opened on Monday at 15,278 points and closed on Friday at 15,138 points, down 0.65 per cent over previous week. Not much of a direction, if any investor was looking for one.

After the Sensex dipped by 541 points on July 27, 2007, most investors would have looked at this week for some clues. But the market remained range-bound largely, except for a big dip of 615 points on August 1, 2007. So, what should the equity investor expect?

Says Rajesh Jain, CEO, Pranav Securities, "One has to adjust their expectations this year." He expects the market to give returns of around 20-25 per cent, a shade lower than the average 40 per cent that one has been getting used to. Agrees Hemant Rustagi, director, Wiseinvest Advisors, "Expect the equity market to give returns of 20-25 per cent in 2007-08."

According to him, the market was overbought in the for some time and it was time it corrected itself. But even these numbers do not look bad at all. That is, if you consider that other instruments like debt instruments that would not give returns anywhere close to that. "Equity investors should realise that bull runs do not continue forever and there are times when there will be a slowdown in the growth rates," adds Rustagi.

Going forward the market could be range-bound for at least another month. After that, one could start seeing some direction. Says Ramesh Damani, member, BSE, "At present, we are being hit because of a global meltdown." He expects the global markets to impact the Indian market for the next three months. "The Indian market will gradually find its own range," he adds.

Is it time to book profits? Damani feels that for the ones who have stayed invested all this while, raising 10-15 per cent cash may not be a very bad idea. "This is a good time to dilute your stock holdings both in large or small-caps," he advises.

Rustagi expects another 4-5 per cent correction in the days to come. That would mean another 600-750 point correction. But most of the movement will be stock specific and not broad based. "It is time that one starts looking at individual stocks, whether large- or mid-cap, then make the decision to buy or sell," says Rustagi. Agrees Damani, "Equities are still attractive for the potential investor."