The gush of foreign liquidity is so strong, due to monetary easing across the globe, it's difficult to believe that the markets would not rally even further.
How far can the markets go, nobody knows. But, next week it would not be a surprise to see the Sensex scaling the 20,000 mark. India's price to earning ratios are still below those of Brazil, Taiwan, Mexico and there could be a scope for further P/E expansion.
While the market momentum is upward, one needs to exercise caution. We never know when negative global events could unfold. In fact, even banking major Citi cautioned this week and said that the markets could react.
It is best to take at least some profits off the table and not remain full invested. The high beta names would continue to hog the limelight next week, including those from infrastructure, metals and PSU banking space.
In fact, defensive which were the favourites last year are turning to be laggards. HDFC, HDFC Bank and ITC are hardly moving. Some of these names are falling as investors increasingly bet on the high beta space.
Meanwhile, domestic institutions continue to sell stocks. In fact, while Foreign funds keep buying into Indian stocks, domestic institutions keep selling. Had domestic institutions to be net buyers, the indices would be much higher than the current levels.
In any case, the focus would now shift to earnings, which kicks-off with the results of Infosys Technologies on January 11, 2013. If results from corporate are below expectations, markets could react temporarily, or else expect the momentum to continue till at least the union budget.