The benchmark indices have seen a rally of more than 10 per cent, since the Union Budget 2016-17. The markets have gained for 3 straight weeks and the buying by foreign portfolio investors suggest that there is more to come.
Global markets too have seen a smart recovery, ever since the US Federal Reserve hinted at just 2 interest rate hikes, as against the 4 rate hikes earlier. This risk-on rally is back and Indian markets are doing well.
Banking stocks have led the recovery with ICICI Bank and State Bank of India gaining more than 20-25 per cent each. The rupee has also strengthened, further encouraging FPI investments.
In fact, foreign portfolio investors have been buying heavily into the Indian markets, which has pushed stocks higher.
Going ahead two things would remain crucial for the markets in the next one month. The first would be the corporate results that unfold in the next one month and the RBI Monetary Policy on April 5.
The RBI is widely expected to cut interest rates by 25 basis points, though there are some expectations that the cut maybe as high as 50 basis points.
Banking stocks are likely to be volatile next week ahead of the RBI policy. Many stocks have run-up and hence a stupendous rally from here on is ruled out.
Focus would also be on global developments. Indian markets were closed for 2-days on Thursday and Friday and the global markets saw some reaction.
Crude oil prices fell and hence we might see some slight negative reaction in trade on Monday.
However, as we have seeing in the recent weeks, every fall is being bought into and the markets are seeing a quick bounce. Hence, we might see the markets doing the same again next week. In short, the undertone at the moment seems bullish and it is not advisable to short the market at the moment.