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Markets Next Week: Time For Profit Booking And Consolidation
Indian benchmark indices had a stunning rally this week, which few would have anticipated at the start of the week. Foreign Portfolio Investors poured staggering amounts of money this week, even as domestic institutions resorted to selling. It was after months that we saw such money being poured into the Indian markets.
Anticipation of an NDA government
This week's rally had largely to do with an anticipation of an NDA government at the centre, following the airstrikes by the Indian army inside Pakistan, late last month. There is a belief that the Modi led government has bettered its chances after the strike, which led to some large scale buying, especially by Foreign portfolio Investors.
One is not certain though, whether this would definitely be a positive outcome, as factors like agrarian distress and joblessness may also be crucial for Modi's victory. In any case, the markets staged a remarkable rally and this was one of the best we have seen in months.
Maybe time to book profits
Following the stupendous rally, it maybe a good time to take some profits off the table. In fact, domestic institutions seem to have done the same this week, as witnessed by their net sale figure. Also, at 38,000 points on the index, the markets are not exactly cheap. With revival in earnings not really happening, it maybe good to sit on some cash.
Another reason for real worry is the fact that mutual fund inflows have begun to slowdown. If FPIs suddenly start selling, it may lead to some pressure in the market.
Midcap and small cap stocks may still have some steam
Midcap and small cap stocks may still have some steam left. In fact, this section of the market is looking a lot cheaper then the index stocks. However, one would have to tread with caution, as some of these stocks have also run-up. This week some stocks from the space like PC Jeweller, India Bulls real Estate etc., saw a very good rally.
However, these stocks have already fallen so sharply, there is hardly any reason to believe there is froth in these valuations. This week also saw some stocks like ICICI Bank and Reliance Industries hitting a new lifetime high.
Invest for the long term
While the Sensex and the Nifty are very close to lifetime highs, we would advise caution. Any investment should be done with a long term perspective in mind.
