With commodity prices declining, top operators may divert money to stocks.
With global commodity prices declining over the past two weeks, top stock brokers and market operators are once again turning their attention towards the domestic equity markets.
Deven Choksey, managing director of K R Choksey Shares and Securities, said the mood seems to be turning positive and this may continue for some time. Those predicting a grim scenario for the stock markets till last week are now looking at stocks,” he said. K R Choksey handles over Rs 2,000 crore worth of client portfolio.
The key benchmark index, Sensex of the Bombay Stock Exchange, on Tuesday surged 2.63 per cent at 14,961 points. The broader index, S&P CNX Nifty of the National Stock Exchange, gained 2.45 per cent to close at 4,502.
A majority of high net worth individuals and stock brokers had taken big positions in the gold and global crude oil futures to hedge against inflation as the stock markets crashed by nearly 6,000 points this year. Global crude oil prices had touched a life-time high of $148 per barrel and gold crossed $950 in the international market in July.
But the prices have been declining since then, with US crude oil dropping to a low of $118 per barrel in Asian trades on Tuesday. Gold futures too continued to drop on Tuesday as a slide in oil and the dollar firmed ahead of the Federal Reserve’s decision on interest rates. Gold for December delivery was last down $13.90, or 1.5 per cent, at $893.60 an ounce.
Choksey said high speculation from global hedge funds was driving crude and gold prices. “Considering the slowdown in the global demand, commodity prices were due for a correction. Hence, all these players will now choose to divert some portion of their money towards stocks which are available cheap,” he said.
First Global Director Shankar Sharma, however, said the equity markets may witness a short relief rally of about 5-6 per cent. But both commodity and stock markets would head downwards after that. “If global demand is softening, how can even stock markets go up significantly?” he asked.
A chief executive officer at a leading brokerage house said equity markets will improve only if foreign fund flows improve and crude stabilises at around $100 per barrel.
