With bull operators on a roll, the benchmark Sensex took just five trading sessions of “jaw-dropping” rally to hit the 36,000 level on Tuesday from 35,000 recorded on January 17.
However, the 1,000-point rally in less than a week, and 342 points gain on Tuesday, has raised the spectre of excessive speculation ahead of the Union Budget scheduled on February 1. The NSE Nifty Index also crossed the 11,000 mark from 10,000 in six months — July 26, 2017 to January 23, 2018 — with several analysts raising the red flag to retail investors against joining the bull bandwagon.
The trigger for Tuesday’s rally was the International Monetary Fund’s forecast that India’s GDP growth will hit 7.4 per cent in 2018-19 and the country will regain the status of the world’s fastest growing major economy. “All the sectoral indices ended in the green except the media sector. There was optimism across with Prime Minister Narendra Modi in Davos and IMF projecting India’s economy to grow at 7.4 per cent in 2018. In spite of nearing January derivatives expiry, the markets did not experience any selling pressure,” said Anita Gandhi, whole-time director at Arihant Capital Markets.
Sameet Chavan, chief analyst, Angel Broking, said, “The dream run continues for our markets as we can see record highs day after day with a fair margin. In fact, in last four or five sessions, we could clearly see this wave mounting quite steeply, indicating a complete gush in the traders’ sentiments.”
The market is witnessing a good inflow of foreign funds. “The velocity at which the market hastened in the last couple of days has certainly turned out to be a jaw-dropping move for many traders. This is a sheer euphoric environment that we are experiencing at this moment. It appears as if the traders’ fraternity has a lot of expectations from the upcoming Budget and hence, probably the anticipation is adding fuel to this ‘no negative is as good as positive’ kind of scenario,” Chavan said.
“We must accept that such ‘too fast too furious’ moves generally do not offer time to think even for those who are willing to ride the tide,” said a dealer at a brokerage.
However, several analysts warned investors about the sustainability of the rally and advised them to stay away or exit. “As a chartist, it becomes very difficult to digest such steep relentless rally and especially when one of lead indicators ‘RSI’ (Relative Strength Index) has reached as high as 82.50 level. Yes, practically, this indicator can remain overbought for ages. But, if we go by the historical evidence, one needs to remain light and adopt a proper exit strategy,” Chavan said.
“Owing to the sharp rise in the index, we would advise our clients to undertake more due diligence and keep invested in quality stocks,” Arun Thukral, MD and CEO of Axis Securities said.
Continuing its record-setting run for the fifth straight session, the BSE benchmark Sensex hit a new intra-day high of 36,170.83 on the back of widespread gains in metal, PSU, oil and gas and financial counters. The 30-share index settled at 36,139.98, up 341.97 points, or 0.96 per cent, breaching its previous record of 35,798.01 reached on Monday.
The Nifty touched a new intra-day high of 11,092.90. It closed the session with a hefty rise of 117.50 points, or 1.07 per cent, at a fresh life high of 11,083.70, overtaking its previous record close of 10,966.20 reached in Monday’s trade.
In fact, markets worldwide are witnessing a bull rally. “With most equity markets across Asia, Europe and the US trading in the green, the sentiment seemed to be optimistic across the globe. While the ongoing corporate earnings and expectations from the Union Budget 2018 took centrestage for domestic investors, foreign sentiment was buoyed after US legislators struck a deal to end the government shutdown and as the IMF revised its forecast for world economic growth by 0.2 percentage points to 3.9 per cent for both 2018 and 2019,” said Karthikraj Lakshmanan, senior fund manager, BNP Paribas Mutual Fund.
Listing reasons for the rally, Thukral said, “The markets are celebrating the long-awaited earnings revival. Despite the low base, the quarterly results so far have been encouraging — be it banks, FMCG, consumer discretionary or IT — and almost all have delivered ahead of expectations. The management commentary too has been positive and the consumption-led demand is back on the track.”
On the other hand, investors have been investing heavily in the mutual funds. “The fund flows from both domestic as well as foreign institutions have been positive. The quantum of funds infused through SIPs is rising every month,” Thukral said.