31st December, 2008
Top 10 queries of stock investors answered by stockinvest.in
From a booming global economy to the depth of gloomy recession has left stock market investors jittery and with huge portfolio losses. Stockinvest.in has tried to address and answer the top ten questions on the mind of investors.
Q1: When will the stock markets recover from the impact of global recession?
Ans: No one can give the exact answer to this question, only a reasonable estimate can be made. It is clear there is not going to be a V shaped recovery in the stock markets. The stock market will test its bottom couple of times and a gradual U shaped recovery will begin after the dust in financial markets settles down.
The ongoing worldwide financial turmoil is a creation of many years of monetary and financial mismanagement. And it will take some time for the issues to be resolved. At the present no immediate relief is in sight.
In the short run the stock markets are going to be volatile giving a few hundred points jump on both sides. The current gloomy scenario points more towards a downside rather than a positive breakout.
The stocks of good companies with solid business and great managements have also been beaten down to unrealistic levels along with unreliable companies and they make a good investment for long term investors.
Those who invest in the stocks of companies with good management and credentials will be grateful for this downturn in the economy and earn good money on their investments in the long run.
Q2: Are people going to stop investing in stocks in the future?
Ans: Investing is about creating monetary security for your future needs and desires. As long as we have these needs and desires investing in equity will continue as no asset class offers better returns than the equity market. This is a historically proven fact.
.
Q3: How badly will the global recession affect India?
Ans: Indian economy is not insulated or decoupled from the global economy. Although India has its own internal market and consumers which will sustain demand to certain extent but overall global scene affects the country to a great extent.
India’s weak internal like poor infrastructure, old technology, lack of investors along with issues like weak governance, rampant corruption, terrorism have the potential to derail the country's growth rate.
On the other hand India also has multiple engines of growth e.g. poor infrastructure also means increased spending on infrastructure, causing growth in related industries and since India is less dependent on developed countries for economic growth it follows that India will tackle the downturn better than most other nations.
Q4: How does this downturn in the economy affect the earnings of companies?
Ans: The earnings growth and profits of Indian companies is going to come down from the earlier expectations. The crisis and its impact on Indian companies have been more severe than what was initially estimated. The sharp depreciation in the value of rupee has led to companies reporting earnings loss.
While such losses are notional and will reverse with the reversal of the currency (i.e., appreciation), the fact is that these will have a bearing on the companies' FY09 earnings and beyond.
Then, companies have also been impacted due to a severe tightening of liquidity and strain on their working capital financing. This has led to delays in manufacturing and lost sales opportunities.
Analysts have revised the target stock prices of companies in view of the earning loss.
Q5: Should investors buy large-caps, mid-caps or small-caps’ stock?
Ans: The allocat |
