Indian stocks flew into a higher orbit on Monday as global risk-on trade in equities came roaring back after the US Federal Reserve indicated it was in no hurry to raise interest rates and that inflation was well below its threshold of worry. As a consequence, the 50-share Nifty surged 226 points, or 1.35 percent, to a fresh record close of 16,931 points. This was the highest percentage gain since August 3 on the index.
The Nifty, up 7.4 percent so far in August, has had the best eighth month since 2006 when it surged 8.6 percent.
Bulls partied across many sectors on Dalal Street and several other indices – financial services, auto and PSU banks – showed strong traction. Twenty seven stocks hit record highs on the Nifty 500 index, the market’s broadest measure – while more than 100 shares traded at fresh yearly peaks.
Markets are likely headed higher, analysts say as the fresh expiry takes root in the futures and options (F&O) segment, where bears are on the backfoot.
Here is a quick take on where the markets could be in the coming few days.
Fundamental view
"The recent 10-20 percent correction (in midcaps and smallcaps) and several IPOs trading at a discount had made the overall markets healthy. The market may move sideways over the next two weeks but a positive move is expected due to the festive season as the entire economy will open up after nearly two years of partial shutdowns due to COVID," said market veteran Sunil Singhania, Founder and Fund Manager at AbakkusInvest.com.
Singhania further said that people are itching to celebrate weddings, anniversaries, and birthdays and also shop and these will result in a positive upside on the economy. However, expectations of returns need to be mellowed down to reasonable levels.
Technical View
"The ferocity of the up-move post the gap-up, throughout the day, especially on the Bank Nifty, had lots of call writers trapped. All dips in the Nifty were bought during the day and bigger players were running up – RIL, Axis Bank, ICICI Bank, and HDFC Bank,’’ said Index trader Asit Baran Pati, founder RankDelta.
"Provided the US markets don’t give an unpleasant surprise, 17,000 is definitely going to be crossed on the Nifty on Tuesday. And we are in line for 17,250-17,300 on the Nifty during this September expiry," Pati added.
However, two market participants sounded a cautious note:
"The writing on the wall is clear. Fortunes of the Indian stock markets are written in America and everything is a function of global liquidity,’’ says fund manager Basant Maheshwari, who runs a well-known and widely respected Portfolio Management Service, eponymous group.
Maheshwari further said he was a little worried about what was happening because currently underlying business and earnings per share are playing second fiddle to global liquidity. "The neighbour (America) and not the host ( India) will decide the time when this party will end," the fund manager added.
Another very well-known HNI investor-cum-trader, who declined to be named, said, "Public was short on Nifty and it rallied very sharply. I am very cautious now. This is the last 5 percent up-move and the market is not going to be easy beyond 17,250 points on the Nifty. So, there is five percent to gain and maybe 10 percent to lose. Be cautious."
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