After two weeks’ of consolidation, the NSE Nifty zoomed to a record closing high in the passing week as landslide victory of the BJP in Uttar Pradesh & Uttarakhand raised hopes for continuity in government reforms agenda for next seven years.
Clearance to important legislations from GST Council as well as global liquidity and Federal Reserve’s 25bps rate hike on expected lines with dovish tone also boosted market sentiment. The Nifty gained 2.5 percent to close at 9,160.05 after crossing 9,200 level while the Sensex is only 33 points away from its record closing high touched on January 29, 2015.
As there are no major triggers for markets in the coming week, the market is unlikely to continue its momentum. It is expected to see some profit booking amid consolidation before Sensex crossing psychological 30,000-mark next week, experts feel but they don’t expect major correction, at least for next couple of weeks, though valuations do remain stretched.
They want to check fourth quarter earnings (January-March), which will kick off next month, before taking further positions because most of corporates are of the view that economy has not seen major revival post currency demonetisation.
Even though Q3FY17 earnings were less impacted by note ban and December quarter GDP was better-than-expected, experts still want to see whether demonetisation effect is really fading or not. They are confident of revival in economy and corporate earnings from FY18 onwards.
“The market is likely to get see some consolidation above the previous highs which is 9,000-9,050 on the Nifty and some amount of correction/short positions getting formed would be good for the market,” Ashwani Gujral of ashwanigujral.com says.
The higher end of range probably has been seen which is about 9,200-9,220; let see what the lower end is, he adds.
Andrew Holland of Avendus Capital says, “The thing that concerns me a little bit is that the valuations have been stretched for some time. So only weak fourth quarter earnings can put an end to this momentum. Earnings estimates have already been brought down from 20 percent from 15 percent since the beginning of the year.
Mohammed Apabhai of Citigroup Global Markets also says valuations do look extreme but investors should not worry about that too much and enjoy the liquidity party for a month of two.
Riding high on the liquidity bandwagon, the Nifty, which has already rallied over 12 percent so far in 2017, looks poised to hit 9,500-9600 mark in the next 4-6 weeks, Apabhai feels. He is of the view that the market is nowhere close to 2008 bubble.
Holland says if GST is implemented on July 1, it does have potential to halt the economy for 3 months because of implementation problems, though longer term framework will be strong.
Global liquidity not only supported India but also other markets and even bonds & currencies. The rupee posted highest weekly gain in a year following correction in dollar index on Fed’s commentary, up nearly 2 percent to 65.45 a dollar.
Foreign institutional investors have taken exposure worth Rs 28,000 crore to Indian equities since February. During the same period, domestic institutional investors preferred to book profits as they supported the market for four months till January 2017 when FIIs were net sellers.
All eyes in the coming week will be on listing of D-Mart operator Avenue Supermarts, the company owned by ace investor Radhakishan Damani, on March 21. Analysts expect the stock to cross Rs 450 on listing day, against its issue price of Rs 299.
Primary market will also be in action next week as the Rs 239-crore CL Educate IPO and Rs 350-crore Shankara Building Products public issue will open on March 20 and March 22, respectively.
On Monday, Dena Bank will react positively after the government decided to infuse Rs 600 crore as part of turnaround linked infusion plan. Kotak Mahindra Bank shares may also gain as the lender sought shareholders’ approval to hike FII investment to maximum 49 percent. However, HSIL may fall as Rajasthan Pollution Control Board ordered shutdown of its Kaharani unit in Rajasthan on March 14.
HCL Technologies, Engineers India and Oil India will also be in action as these companies will consider a buyback proposal on March 20.