“Avoid” or “Not to Avoid”
One of the scenarios while considering for investment in stock market is:
Following hike in petrol price and expected hike in diesel and LPG in the coming weeks, inflation will pick up in May to July enticing RBI to take further hawkish steps to control inflation. It is likely that steps taken by RBI will moderate inflationary pressure slowly and will peak in August while core inflation will continue rising until September. Both headline and core inflation will remain elevated until Q4 2011 due to strong pricing power and first- and second-round effects of fuel price hikes.
Other scenario depicts:
Oil dropped after an international energy watchdog expressed "serious concern" about the negative effect of higher prices on the global economy. The IEA International Energy Agency said that even after falling about 10 percent, oil is still cutting into household and business incomes around the world and appealed for urgent need for additional supplies to be made available to refineries. From its chart also, it seems for short term, oil has peaked out and may come down to USD 80 per barrel.
Both the case is very sensitive to Indian economy. Any scenario weighs over other has greater impact on Indian stock market.
The 1st scenario is going on and 2nd is reeling with speculator. The strategy in both scenarios is different, former advises “Not to buy now” and latter suggests “Start Buying in phases”. That is the reason; investment in share market is difficult.
In either case, all the factors will be priced in stock price at some point of time. Question is “when?” It is funny to get answer from anyone as it is “Timing the Market”, which is never easy task. Market is always smart and prepare itself for next action well before the actual result comes into fore. However, without eyeing on micro and macro factors, it is better to look at technical charts of your choose stock to get inform yourself – when your stock has bottom out and has become attractive for investment.
Overall under present circumstances, best time to buy for investment is in between July-August when the picture on inflation and crude price will be clear and current course of action of central bank will reflect on India Inc’ battered quarterly result.