In a testament to the underlying bullish sentiment among Indian investors, benchmark indices — Sensex and Nifty — have rallied in 12 out of the last 14 sessions, clocking nearly 7% returns.
Sensex is hovering around 61,000 levels, and just around 1,000 points away from clocking an all-time high of 62,245, while Nifty’s rise to 18,100 puts it around 500 points away from its peak of around 18,600.
“The market is poised to continue the ongoing rally aided by support from the mother market US. The driving force behind the ongoing rally is the strength of the US economy, indicating a lower probability of an immediate US recession and, more importantly, indications that inflation is plateauing and might show a declining trend soon. This might enable the US Fed to slightly moderate their hawkish stance,” said Dr V K Vijayakumar, Chief Investment Strategist at
, in a note last week.
In the last eight sessions, the Dow Jones has risen over 8%, suggesting that the US markets have bottomed out.
The next trigger for the markets, according to analysts, is the US Fed’s stance on interest rates. The US Federal Reserve is slated to meet on Tuesday for its two-day policy meeting, with traders widely expecting a 0.75 bps rate hike. Market participants will be keenly eyeing Fed commentary for signs of any moderation in hawkish stance.
Apart from that, they believe strong domestic earnings and signs of FII returning to Street could give fundamental support to the ongoing rally. “Domestic earnings season is very good. There are absolutely no disappointments on the earnings front. Once we have the RBI meeting out of the way, and the stance is positive, then the market can try to test previous highs,” Kranthi Bathini of Wealth Mills Securities told ETMarkets.
Definitely, the market has the potential to hit new highs before the end of this calendar year, he added.
Foreign institutional investors (FIIs) have turned buyers, and domestic institutional investors (DIIs) have turned sellers in recent days. Monday’s FII buying of Rs 4,178 crore was their largest buy figure in recent months. “The implication of this role reversal by FIIs is that this has triggered short covering in stocks like the
twins where FIIs are major holders. This trend can take the market up further,” Vijaykumar added.
The zone of 17,800-18,100 has been a decisive one for many months, and the markets have been facing supply near this zone, said Mehul Kothari, AVP-Technical Research, Anand Rathi Investment Services.
“Foreign portfolio investors’ net longs in index futures and their long-short ratio indicate room for downside, and the trigger could be 17,650. A breach might bring in profit booking in the markets. On the upside, we would advise traders to ignore the 200-300 points in the Nifty and wait for a clear close above the 18,100 mark. A close above this level would be a mere formality to breach an all-time high,” Kothari said.
Analysts, however, cautioned that DIIs are likely to sell at higher levels, and many retail investors might be tempted to book some profits. A sharp fall in the domestic currency could prove to be a major risk for the indices too, reversing FII buying.
“Higher crude oil prices continue to be a key monitorable as they impact trade balance and current account. The rupee weakening against the dollar is the single most important risk for the markets,” according to Aditya Sood, fund manager, InCred Asset Management.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)