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Investment Alert

With the outlook on the Sensex uncertain and ignored bullion suddenly looking attractive, investors may feel the need to shuffle, shuffle, shuffle.

By Shilpa Nayak

At the time this article is being written, 4:00 pm on September 20, 2001, the Bombay Stock Exchange's Sensex is rangebound between 2,750-2,850. Things are unlikely to have changed much by the time you read this article, which, if you are an avid reader of Business Today (you should be) will be early on the morning of October 1, 2001. True, the market may have moved up, or down, a few hundred points, but that doesn't really change the investment-climate. So, what should you do?

For starters, don't really look at gold, despite what's happened to its price-from Rs 4,470 for 10 grams on September 10, it moved up to Rs 4,700 on September 18. We know this is exactly what articles in this section have been saying for the past year, and we know the events of September 11 proved us all wrong, but the yellow metal is unlikely to move up any higher in the long-term. The nervousness in the bullion market was driven by uncertainty on the gold positions held by some affected Wall Street firms but that has now passed.

Now, to the stockmarket. A day before the NYSE reopened for trading, the Sensex hit a historic eight-year low of 2,644.56, largely on account of FIIs selling heavily to meet an anticipated redemption rush when the US exchange opened after a week. The markets could well dip further, but this is a great time to buy. Most fund houses maintain that the fundamentals of the domestic tech sector, for instance, are strong and that companies in this sector remain good long-term investments. So, go out and buy some.

The debt market too displayed some uncharacteristic volatility in the wake of what happened on September 11, but as Sashi Krishnan, Fund Manager (Debt), Cholamandalam Cazenove, puts it: ''The fundamentals of the market have not changed, so there is no reason to panic; investors should stay with their investments instead of selling in a panic.'' Still, the rupee's continued depreciation against a depreciating currency is cause for concern, and in the unlikely event that this does continue, investors will have to watch the debt market closely. Indeed, bond yields are inching up as the rupee is falling.

So, what should investors do? Well, our recommendation is that they should either invest in stocks that are trading at their 52-week lows, albeit after reassuring themselves of fundamentals, or just not do anything at all. That means, letting their investments in all kinds of mutual funds, debt instruments, government securities, real estate, and gold (boom or bust, the last two aren't really great investment options) lie. Says S.V. Prasad, President, Zurich Mutual Fund: ''It is best to adopt a wait and watch policy; the markets are recovering and they seem to have already discounted what's happening.''

There's also been some regulator-activity to spur trading. The government's decision to consider upping FII-holding limit to 74 per cent from the existing 49 per cent, the RBI's announcement that it is allowing banks to fund margin-trading, and SEBI's move to modify price-filters could see the markets revive a bit.

Net NET: If you feel intrepid, go out and invest directly in equity; if you're feeling just a little brave, opt for aggressive growth funds; but if you are feeling even a wee bit tentative, just wait things out. If you opt for the last, there's a slight chance that you might end up losing out on an opportunity to pick stocks when the index is at its lowest this decade, but, as we've mentioned, it is a slight chance.


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