After falling marginally in the previous week, India's benchmark indices once again saw some gains. It was a truncated week, with markets being closed on Wednesday for Mahavir Jayanthi and on Friday for Good Friday.
As we have just a month to go before election results are announced, markets may continue to be increasingly volatile.
In fact, consolidation may continue to happen at higher levels.
Markets Look Expensive
The Indian markets at the moment are looking increasingly expensive. In fact, the Sensex p/e at near 27 times, trailing p/e is certainly expensive. Unless earnings grow by 20 per cent over the next two years, it maybe difficult to justify such high p/e multiples.
Investors are advised to stay on the sidelines, rather then investing at such high levels. However, there maybe select pockets that are cheap, and it is no point chasing the stocks that have already rallied significantly.
Markets Being Fuelled By FPIs
The Indian markets are largely being fuelled by money from Foreign Portfolio Investors, who are taking advantage of a strong currency.
In fact, so far in the month of April, they have net bought in the cash market to the tune of Rs 8,000 crores. In the month of March alone they net bought in the cash market of a staggering sum of Rs 32,000 crores.
The amount being pumped into frontline stocks has been large. However, once the liquidity dries-up we might see markets trading flat.
Election Results The Key
Election results would hold the key for the markets, with just over a month left. Expect markets to be volatile. The sharp rally in the indices, already signifies that investors are expecting a Narendra Modi led government at the centre.
Past trends suggest that one cannot be certain. In a month's time, we may have the exit polls that throw some light, on which way we are headed. Exit Polls would be out on May 19, while actual results would be declared on May 23.
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