Indian stock market benchmark Sensex today zoomed 950 points to end near the historic level of 60,000. However, the massive rally in Sensex from March lows of last year – without any significant correction in between – has made some analysts cautious.
“All previous bull markets in India – 1992-92, 1994, 1998-2000, 2003-07 – had big corrections of 5%, 10%, even 20%. But not now so far. But this will change and the market will correct, perhaps soon, since valuations are hard to justify,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“This ferocious bull market continues to baffle both bears and bulls. Stock markets are all about ups and downs. But this bull market has been an almost one-way street for almost 18 months now. More importantly, this is almost a global phenomenon with China, Hong Kong and a few other countries being the exceptions. The mother market US is leading from the front, ignoring even tapering indications from the Fed,” he said.
“Amateurish money of retail investors is now dominating over the smart money of institutional investors. This may change when FIIs turn into major sellers. We don’t know now when and what might trigger that. Taking some money off the table may not be a bad idea even while riding this bull,” he added.
On Wednesday, the Federal Reserve kept interest rates unchanged but signaled that it’s on track to start scaling back asset purchases this year. However, in some comfort for investors, the US central bank left the door open to extend stimulus if the economy needs it.
After scaling a new peak of 59,957.25 during the day, the 30-share Sensex settled 958 higher at an all-time high of 59,885.36. Similarly, the broader NSE Nifty soared 1.57% to its new closing peak of 17,822.95. It touched an intra-day record of 17,843.90.
Global markets were also higher too. Concerns about potential spillover from Evergrande’s woes into the wider financial system triggered volatility in equity markets in recent weeks.
Santosh Meena, Head of Research, Swastika Investmart, said: “Our market is in a roaring bulls market and outperforming global peers where the market took minor correction as a buying opportunity. The recent correction was driven by China’s Evergrande issue and this matter is easing for time being therefore we are seeing a short-covering rally across the globe. The outcome of the Fed meeting is not favorable for the equity market as Fed has mentioned the timeline of bond tapering but the global markets had already corrected ahead of this meeting so we are seeing a short-covering rally because the market likes clarity instead of uncertainty.”
Besides, “the Indian market has its own positive factors like unlocking, strong growth in the real estate sector, good monsoon, positive developments in government policy, and investor’s confidence. The growth momentum in the real estate sector is boosting the sentiment because it has a ripple effect on multiple sectors,” he said. The Nifty realty index today surged 9%.
Mr Meena however has a word of caution. “It will be important to see global markets’ behavior from here and if they remain calm then our market may continue its outperformance where 18000 & 60000 are the psychological hurdle for Nifty and Sensex respectively however if global markets start to fall once again then we can expect profit booking in our market as well,” he said.
Devang Mehta, Head – Equity Advisory, Centrum Broking, said liquidity remains extremely strong which is supporting Indian markets.
“The rally today was symbolic of the prevailing strong sentiment locally on the back of reduction in covid cases and the strong vaccination numbers. With improvement in economic activity & the optimism around the capex cycle revival, the earnings trajectory for India Inc will naturally get a big boost. Most of the companies which are market leaders in their respective domains have seen operating efficiencies & productivity improve & also been able to reduce debt with prominent gain in market share as well. Liquidity remains extremely strong, be it foreign portfolio investors, local mutual funds, insurance companies, family offices, HNI’s or even the retail investors,” he said.
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