After nearly a 1,000-point Nifty rally in just two consecutive sessions, Atul Suri, CEO, Marathon Trends PMS, said, "We believe we are still in a short-covering rally and will continue to see further short squeeze until expiry."
In fact, most of 569 points gain on the Nifty on September 20 were due to short covering-led rally, as a lot of pessimism had built in the market for more than three months due to slowdown, weak earnings, global recession fears, higher crude oil prices etc, which had dragged the market 11 percent lower from its record high touched on June 3.
After rising from 10,700 to over 11,650 levels in two days, Suri said he had a medium-term target of 13,500 for the Nifty, implying nearly 20 percent potential upside from September 20’s closing and nearly 16 percent from 11,650 levels.
Corporate performance and earnings revival would be important beyond short-term, he said, adding he sensed a change in sentiment after government action.
The government, on September 20, cut corporate tax rate to 25.2 percent from 34.9 percent (inclusive of surcharge and cess) and also reduced minimum alternate tax rate to 15 percent from 18.5 percent, giving a direct fiscal stimulus of Rs 1.45 lakh crore.
Hungarian-American investor George Soros' famous quote “bull markets are built on walls of worries”, explained the current movement of the market and the next leg would be where quality stocks rally, Suri said.
He said banks would outperform going forward.
On the global front, Suri said markets in Brazil and Canada were making new highs, France was making 52-week high, though trade war and Iran remained a concern. Even Indian markets were factoring something else, he added.
In fact, markets were making higher bottoms, but breakout on new high would be a challenge and would be very important for further higher levels, he said.
The last two years had been very difficult but Indian investors were rewarded due to SIP (systematic investment plan) culture, Suri said. "In two days, investors had seen one- year return. NAV jumped by 10 percent, which shows that Indian retail investors are making money and that is the key factor."
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
