Immense liquidity is driving stock prices in India, with little worry over the fact that valuations have become rich. This week the benchmark indices once again ended higher, which has been a pattern for many weeks now. At 23 to 24 times p/e on the Sensex, markets are significantly expensive. But, the money flowing into mutual funds is driving stock prices higher.

A staggering 100 stocks hit 52-week highs this week including names like Bajaj Electricals, Bajaj Finserv, HDFC Bank, Indiabulls Ventures, Manpasand Beverages, Redington India and TVS Motors. It is doubtful that this trend will end anytime soon, unless the Korean situation gets worse. Until then money pouring into mutual funds will continue to drive stocks higher.

Interestingly, the threats by North Korea have had very little impact on the global markets, though one must admit that FPIs have been in a selling mode since the start of the month. Any dips will be bought into by mutual funds. At the same time there is hardly any divestment or major government offerings that could suck out the liquidity. This will ensure that prices keep going higher. It will not be a surprise to see markets ending another 2 per cent higher next week.

GoodReturns.in