For momentum investors/traders these are good time to make quick bucks in stocks, for contra investors/ traders these are good times to sell and yet for those who are conservative may want to wait and watch.
The Reserve Bank of India’s (RBI) Governor Shaktikanta Das in an interview with CNBC Awaaz on August 21 said that India’s stock market is not in sync with the real economy which will result in a correction.
The RBI Governor did sound cautious but did not say when is the correction expected.
“There is so much liquidity in the system, in the global economy, that’s why the stock market is very buoyant and it is definitely disconnected with the real economy,” Das said in an interview with the CNBC Awaaz news channel.
“There will definitely be a correction but we can’t say when.”
Well, he is not alone in thinking that there could be some correction or consolidation in the near term. Most experts which Moneycontrol spoke to after the interview recommend investors to remain cautious as the market has run-up too fast.
According to minutes of the latest monetary policy committee meeting, released on Thursday, it suggested that the bank sees little room for rate cuts in this environment which disappointed the bulls in the week gone by.
The Nifty seems to be facing a lot of resistance near 11400-11500 levels, but global liquidity is something which is supporting the bulls and limiting the decline on the Street.
The Nifty50 has rallied more than 50 percent from the lows of 7500 back in March 2020. However, the big party was seen in a small & midcap space.
FIIs have poured in more than Rs 13000 crore in the cash segment of the Indian equity markets so far in the month of August while DIIs pulled out more than Rs 8000 cr in the same period.
“Stocks appear a bit overheated, especially as economic data recovery stalls and global rally momentum slows. The markets appear ripe for a correction,” Sahil Kapoor, Chief Market Strategist, Edelweiss Professional Investor Research told Moneycontrol.
“RBI's focus on inflation at this time has halted the decline in interest rates. However, inflation stickiness appears to be a supply-side problem and demand slowdown is correctly reflected yet. It still appears that RBI may opt for rate cuts later in the financial year,” he said.
Time to put fresh money?
After a sharp rally seen since March many retail investors, as well as institutions, are waiting on the sidelines to put in fresh money in the markets.
Timing the market could be tough, and no one can’t predict the bottom. No one knew that Nifty would make an intermediate bottom at 7500 back in March and then bounce back.
But, yes there is a general consensus among the experts that the markets look overheated and there are chances of some consolidation, But, markets have surprised many in the past, and it continues to do so not just in India but across the world.
“On December 5th, 1996 Alan Greenspan in a televised speech for the first time described the roaring US Stock market as "Irrational Exuberance" which created ripples across the world. But Mr. Market is above all, it will do what it wants to do and does want to be dictated by any power of Chair,” Umesh Mehta, Head of Research, Samco Group told Moneycontrol.
“US markets dipped by a fraction the next day and almost doubled in the next four years marking the year 2000 as a major top. Back home RBI Chairman may have commented appropriately taking into consideration round level realities, but that will not influence the Market as is expected. Markets will take its own sweet time to turn when no one expects,” he said.
Shah further added that investors should base their decision of deploying cash independently irrespective of what the RBI Governor's opinion is. “For momentum investors/traders these are good time to make quick bucks in stocks, for contra investors/ traders these are good times to sell and yet for those who are conservative may want to wait and watch,” he said.
Shah further added that being on the right side of the market should be the prime goal and not be fixated on the bull or bear side of the market.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.