Markets May Continue Trending Higher Next Week

Business

oi-Sunil Fernandes

Markets may trade higher next week on account of good liquidity.

By Sunil Fernandes

Updated: Saturday, May 13, 2017, 7:39 [IST]

The Sensex has hit a new historic peak this week and the trend of hitting new highs continued this week. Many analysts are suggesting that the markets are overheated and it is time to be cautious. The problem right now is that there is so much liquidity in the markets, there is very little scope of the markets coming down.

So, where is this money coming from? This liquidity is largely coming into mutual funds, where investors are pouring money. Recently, there were reports that select mutual funds from the small cap space have stopped accepting subscriptions, citing overvaluations.

Some reports suggest that monthly SIPs are almost Rs 5,000 crores to Rs 10,000 crores every month. One has to deploy that money, which tends to push stock prices even higher.

We believe that there is more upside going forward given the fierce liquidity. Unless, interest rates across the globe rise fast and in India as well, there is very little hope of the market falling. If you have not invested in the markets and missed the bus, it is better to stay on the sidelines.

Investors are now recommending buying the beaten down names from the pharma and the IT space, as elsewhere valuations look very stretched. We ourselves have recommended some small and mid cap stocks that are interesting valuations.

You can read our small and midcap stock ideas here.

There are not many cues from the international markets next week and investors would now watch the US Fed meet next month for any interest rate hikes. If the pace of rate hikes get faster, we may see some reaction to stocks going forward.

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