Will Correction Halt Sensex & Nifty's Dream Run?

May 02, 2017 | 06:50 PM IST

Nifty and Sensex are currently going through a glory run. Both the stock market indexes have touched their all-time high. The small-cap and mid-cap indices are at the record high too. Many investors are saying that the much-awaited bull run has begun while some are being cautious in their review of the market dropping the hints of a possible correction around the corner.

Varied opinions from the so-called market experts are not new for the investors. Every expert has his own theory of how the market is behaving or will behave in the future. But if investors spend all their time listening to the opinions of all the experts, it will become difficult for them to lead a normal happy life.

So to make the investors' lives easier, let's take stock of all the market happenings and try to understand what the market has in store for us.

Will Nifty Break The Resistance?

Only last week Nifty touched its all-time high level 9300 since then it also crossed the 9350 level and made way for the experts and speculators to predict further high. Many of them said that it is likely that the market will reach the magic figure of 10,000 by the end of the year. On the other, some made a relatively modest prediction of 9700-800.

Before giving in to this overpowering excitement, let's take a moment and try to understand the reason behind the current euphoria. The quarter which ended this March was the quarter exactly after the demonetisation-hit Q3. In the last 3 months, there have been many positive developments on the corporate and the government front. By the time we reached March, all the small-caps and mid-caps, who had suffered the most in the previous quarter, had not only recovered but had exceeded their expectations and are now expected to report good earnings.

The above-mentioned developments perfectly coincided with the positive global cues. Also, in an unprecedented event, the rupee breached the 63 mark compared to the dollar, at the same time which subsequently resulted in the phenomenal market run that we witnessed last week. So this upbeat market sentiment is a culmination of many elements which may or may not remain constant in the future. Which brings us to our next question - what are the challenges ahead?

The Trump Menace And US FDA

We are at the end of a good earning season. In the near future, there are no potential triggers which can move the market. However, on the global front, there are several challenges which can have an adverse effect on some sectors. The topsy-turvy foreign and economic policies of Trump administration being one such challenge. Since Trump took over in November, there has been hushed murmur about his policies in the markets across the globe. The changes in the visa policies and travel restriction had already set the alarm bells ringing for the IT and pharma companies who have a great dependence on the U.S. Not just that, Trump's "buy American, hire American" policy is giving sleepless nights to the Indian IT giants.

On the other hand, the US FDA is tightening the screws on the Indian pharma companies with compliance policies. As a result, pharma companies like Lipun, Divi's Laboratory, Sun Pharma and Aurobindo Pharma have seen a significant downfall in the recent past. Will these developments become a roadblock on the market's glory run? Can't say, but it certainly takes some steam out of current euphoria.

The U.S Fed Rate Hike

Those who were looking for an opportunity to enter the market are expecting the U.S Fed, which begins its two-day meeting on Tuesday, to hike the rate. The rate hike would certainly bring in some correction creating a foothold for the investors. But the build up before the meeting suggests the rate will remain unchanged. If indeed so happens at the end of The Federal Open Market Committee (FOMC) meeting, it will only help the market rise further high.

 

 

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