5 reasons why investors shouldn’t worry about the slipping Sensex

Ever since the Modi government has come to power, Sensex had been climbing to new highs. However, in the recent times Sensex seems to have entered the slipping mode. Though these dips have not been that significant (except for the 600-pt slip recorded today), but investors are very worried. The million dollar question is: Should they worry at all?

Not really, suggests Economic Times article titled 5 reasons behind Sensex's 600-pt slip and why investors needn't worry. As per this article, five factors mentioned to be playing spoilsports in the market are:

1. Rupee losing ground

Since June last year, US dollar has grown from strength to strength over rupee. However, analysts aren’t treating this trend alarming. A market watcher, while speaking to the ET opined that considering a composite basket and not just rupee dollar, it has been found that rupee has actually strengthened a little in the last year.

2. Fed rate hike and higher volatility

As per the ET report, a market watcher said that as the market adjusts to the US interest rate cycle, it would fluctuate between 8500 on the downside and 9100-9200 on the upside for next few weeks.

As a benefit for long term investors, a 5% to 7% correction in the market will fuel the economy and corporate earnings at the same time.

3. Good return after 2 years

The Economic Times report has further revealed that market being volatile over next 12 months one cannot expect a return of 25%-30%. Vibhav Kapoor, Group CIO of IL&FS has confirmed to the ET that if economy prevails at the same motion like now, good return is expected in next two years.

4. FY17 – Happy Days

While analysts are positive of a higher growth gradually, FY15 earnings might be below 5%. Though FY16 would be better and might witness earnings around 13%-15%, it is FY17 when the financial experts are expecting a turnaround. Nilesh Shah, MD and CEO of Kotak AMC told ET that earnings can go above 22% in FY17.

5. Technical factors

Nifty with intraday low of 8850 last week has been bouncy for quite sometime. Slipping further, Nifty is stable at 8800 today but may break 9000 level soon. GEPL Capital report states that if it breaks 8850 level, it may droop at 8800-8740 level in future.

Analysts have opined that if 9,100 can’t be achieved very soon, extreme volatility, negative bias and stock specific action would continue.

(Image: Reuters)