Indian markets are most likely to start the day flat after a big rally on Monday. Investors flocked to stocks and pressed the panic button but this time for buying
On Monday, 118 stocks breached their 52 week highs on Bombay Stock Exchange. Midcap and smallcap stocks are having the best of the times. With large caps leading the way with Reliance Industries Ltd. yet to participate in the rally, one can expect a big rally if Reliance participates.
Is cheap money leading India's rally?
Thanks to central banks around the world holding on the low interest regime, cheap dollars are finding their way to Indian markets. There is a gush of liquidity flowing into the markets at present. We believe this mad rush for participating in India's economic growth in the next 2 years will only spike up. But what makes us jittery is present day global economic situation coupled with the high momentum in speculative stocks. Inflation is alarming despite of RBI is taking right steps with intermittent rate hikes.
While investors tend to get carried away by moves like yesterday, we advice them to hold their nerve as the quality of stocks that are moving up was never good from the last one month. Investment positions are not to be disturbed but we would avoid long trading positions for the next 1-3 months. We stick to our short term bearish view though technicals predict a big move above 5600 (on a closing basis) for Nifty