The markets are on a roll and made new lifetime highs on every traded day during the week. What’s driving the rally and is the rally sustainable are two questions on everyone’s mind. Let’s attempt to answer these questions.
Firstly the biggest reason for the rally is that there is a widespread belief amongst people who matter that these elections will throw up a stable government and there would be a government which would give India the direction it needs. The second reason is that this view is backed by people who have the money and are putting the same in the market. In the week gone by as much as Rs 7,500 crs was invested by foreigners which is equal to 1.25 billion dollars in just five trading sessions. The third reason is that the rally is on account of buying by strong hands and the retail investor is nowhere in sight. This gives a feeling of comfort that the rally is sustainable and still has steam left.
The recent ETF or Exchange Traded Fund of Rs 3,000 crs by PSU companies saw a retail subscription by a mere 33,000 applicants who together invested Rs 210crs. This speaks for itself and indicates the apathy of the retail investor towards the market in general and IPO’s in particular. He couldn’t care less and is just not interested in applying for issues. Recent examples were Engineers India and Power Grid Corporation which in hindsight have given decent returns to people who applied, but the retail response was simply poor.
Results season would kick in, in the next 10 days and it would be interesting to see how the IT sector fares considering the price damage in the sector in recent times. Also the appreciating rupee would prove a stumbling block for them. The hedging mechanism used by these companies would become crucial for their success and the markets would appreciate and punish those whose policy towards hedging is accepted or found wanting.
March series of futures expired on Thursday the 27th March. NIFTY expired at 6,641.75 points, a gain of 402.95 points or 6.45%. One does not remember this kind of gain in a month in a very long time. This augurs well for the market and for the rally to sustain. The rupee too broke through the 60 level and closed at Rs 59.93. One saw levels of below 60 after August 2013.
Markets are well placed and seem all set to rise further. There will be corrections but they would be corrections only. Enjoy the rally as it happens and unfolds.
