Indian Markets On A High As Elections Approach
It seems like the sentiment of euphoria has taken over Dalal Street after the announcement of the dates for the general elections. The voting for the elections voting will be held across India in seven phases and the election results will be declared on May 23. Since the announcement, the bulls have been on steroids as hectic buying is seen across the board. The Nifty settled at a 6-month high, as did the BSE Sensex which has gained over 1100 points in the last three trading sessions. Meanwhile, the banking index, Bank Nifty, hit the headline as it scaled to an all-time high. Now, if you are from the bull camp, you can certainly thank the FIIs as they have pumped in more than Rs 28,000 crore since February 19. This is a sharp infusion of funds within a short period of time. There are a number of factors which have revived FIIs' love for the Indian equities, the most vital factor being the FIIs' fancy for stability and they have been keen on the current political dispensation continuing at the Centre. That looked like a fait accompli till the Congress turned the tables in the three state elections which were termed as semi-finals before the general elections. However, the tale has considerably changed in favour of the ruling NDA after Prime Minister Modi scored a moral and, perhaps, political win with his astute diplomacy after the Pulwama terrorist attack. Also, the data released during the week brightened the chances of a rate cut as IIP came in tepid and inflation was below RBI’s target. CPI inflation came in at 2.57 per cent for February and IIP slowed to 1.7 per cent in January.
On the global front, a host of developments took place; the Dow Jones wilted as its largest component Boeing came under pressure after a second deadly plane crash in less than five months prompted governments worldwide to ban the aircraft (Boeing 737 MAX).
However, on Wednesday, the US stocks traded firmly in the positive terrain with the S&P 500 closing above the 2,800 mark amid better than expected reads on durable goods orders and muted inflation. On the US-China trade deal front, US President Donald Trump said he was in no rush to complete a trade pact with China. Meanwhile, the European stocks witnessed turbulence in the initial part of the week on the back of the European Central Bank slashing its growth and inflation forecasts. This move raised concerns about an economic slowdown. Also, the UK lawmakers rejected Prime Minister Theresa May’s renegotiated Brexit withdrawal agreement by a resounding majority. However, on Wednesday, the stocks edged higher as the Eurozone industrial production rose more than expected in January.
Indian markets have witnessed a scintillating rally within a short period and the stocks from the mid-cap and small-cap universe have seen upsurge of anywhere between 5-40 per cent. The strategy going forward should be buying on dips. 'The trend is your friend', so goes the saying, hence it is important to be with the trend and certainly the landscape over the last couple of weeks has turned bullish. However, at the same time, we would give our readers a piece of advice not to chase momentum and become a victim of FOMO, i.e., 'fear of missing out' the rally. Going ahead, all eyes will be on India’s current account deficit and India's trade balance. On the global front, the spotlight would be on the progress of US-China trade talks, Bank of Japan's monetary policy outcome, Brexit deal and the crude oil price movement.
