The Nifty hit new lifetime highs this week to close on Friday at a new record of 15,435 points. Looking at the structure of the markets, likely accommodative stance of the RBI next week, opening up of lockdowns like Delhi, and global cues, it will not be a surprise, if the momentum gains further steam next week. In fact, it is highly likely that we may see new record highs being hit by the markets.
"The equity market closed for the week on a high note with net gains for the major indexes. The buoyancy stems from improving pandemic related conditions, and also due to broad indications that it has actually peaked out. This gives greater certainty about the future in terms of the likely relaxation of lockdown conditions in the major cities across the country, and also a faster return to normalcy.
There is also a renewed vigour in the massive vaccination efforts, as many state governments have started inviting bids to supply vaccines to ensure universal immunization, and as the realization that only such efforts would ultimately kill the virus is taking roots," Dr. Joseph Thomas, Head of Research, Emkay Wealth Management on Market.
According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, the overall structure of the market remains positive as fresh covid cases continue to decline and investors are upbeat about unlocking of economy in June which will help revive commercial activities.
However, the key going forward would be the trend in the markets abroad and also how US bond yields move.
"The global economic and market conditions have also been supportive with the growth outlook looking up for all major regions, which may contribute to more favourable impact on trade and commerce. The US numbers, the RBI MPC meeting next week, and the further gains in the pandemic conditions are likely to engage the attention of market participants in the coming week," says Dr Thomas.
Interestingly, there have been some talks of a stimulus for the badly impacted sectors, which should also help propel the markets higher.
"Many states are likely to follow the footsteps of Delhi and reopen their economy soon. Hopes of further stimulus by government is also bolstering investor confidence," says Khemka.
"Thus, as the 2nd Covid-19 wave continues to recede in India and pace of vaccination expected to pick up from next month, we expect the long term fundamentals to remain intact. Rising global inflation is a worry but is unlikely to hurt India, unless energy prices start picking up. Further various Central Banks have maintained their hawkish outlook. Next week RBI's MPC would be key moniterable, where also the officials are expected to maintain their accommodative stance. On the other hand, US markets are shut on Monday due to Memorial day," he says.
At the moment the markets are in a sweet spot, however, fundamentally the markets are overpriced at these levels. Most analysts believe that the p/e multiples for the major indices are at a premium to long-term averages. Hence, caution is advised.