No takers for bargains on stock markets

There could be a lot of stocks that look attractive as their prices had fallen steeply from their peak prices, as the Sensex hit a lowest closing since May 2007.

But no one is rushing in to buy. Even funds, that are flush with money, seem to be in a mood to wait as the issues that haunt the market are going to threaten investor sentiment for a while.

Crude oil, at an all time high of $141, continues to be a major concern for global markets. Dow Jones Index fell by 358 points when the trading ended on Thursday. "Domestic issues like higher inflation at 11.42 per cent, more monetary action from Reserve Bank of India in its next monetary review meet on 29 July and political instability also added to the weakness," said Amitabh Chakraborty, president, Religare Securities.

There was not a single Sensex stock in green as the benchmark index fell by 619.6 points to close at 13,802.2.

State Bank of India, which hit Rs 2,540 in January is today quoting at Rs 1,158 with a forward price to earnings (PE) ratio down to 7.8 times. ICICI Bank is available at Rs 653, at a PE of 13.8. Infosys, the IT major continues to grow at 25 per cent but its PE is down to 17.5 on estimated 2009 earnings.

The story of emerging markets and India as an investment destination does not change, but short-term worries are going to keep investors away, says Bryce Johns, chief investment officer, Kotak Life Insurance. "Probably little more of unwinding to happen before people come back," Johns said.

Oil subsidies that the government is sitting on, the fiscal condition and election year are causes for concern that are likely to push the markets further down. “Investors should enter only if they have a three to five year investment horizon,” said Johns.

A day after State Bank of India and Union Bank of India hiked their lending rates, their shares fell by 4.6 per cent and 2 per cent respectively. Bank stocks continue to reel under the interest rate effect, while interest rate sensitive sectors like realty and auto took a hit. Unitech, the Delhi based developer on Friday declared 52 per cent fall in its fourth quarter profits. The stock is already down by 63 per cent this year.