9th March 2005, 08:34 AM
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Will the Sensex touch 8000 by April 2005? (Please Vote)
Will the Sensex touch 8000 by April 2005?
Quote:
The sensex has closed at 6915 on Tuesday and is all set to cross the 7000-mark. The Budget’s out of its way, and Dalal St seems to be in no mood to pause and take a look at what’s been happening on the political front.
If you’re wondering what happens next on the bourses, here’s what the gurus have to say: The markets are expected to rise further. After 7k, they expect the sensex to move in the price band of 6800-7200, before testing newer highs.
An immediate correction, however, is expected after the 7000 mark is actually breached. This is unlikely to put a halt to the long upward journey, though, as local mutual funds are still sitting on piles of cash. Global liquidity is also expected to continue to flood the bourses.
There’s a flip side as well. Derivatives indicators are now showing signs of increased stock market volatility.
Sharper volatility in the current market scenario is more dangerous than ever because both local and domestic investors have parked huge funds in mid- and small-cap stocks which normally fall fast and sharp during corrections.
In the last five trading sessions, the ten-day historical volatility for nifty has nearly doubled from 8% to 15%, while the implied volatility has moved from 20% to 18%.
Implied volatility measures the market’s perception, about the volatility of a contract price at a future date.
“If ten day historical volatility increases along with Nifty, it would be a warning signal for traders to turn cautious. Till now, it doesn’t appear that one should still be fearful of a major reversal,” says an analyst at Motilal Oswal. Market players rely on the derivatives market for indicators as the segment forms the price discovery platform for most stocks.
Most experts, however, believe that the rally has a long way to go as it is supported by the big surge in global liquidity.
Global investors have diverted a major chunk of their investments to emerging markets and India is among the favoured destinations.
Fund managers at global funds are under pressure to make allocations for India. “If I miss the upside, I’ll be singled out for failing to take advantage of a rising market. But, if we all suffer a downside, it’ll be attributed to a falling market and no one will be singled out,” said the manager of a global fund.
Local mutual funds have grossed close to Rs 3,000 crore from IPOs of new equity schemes since the beginning of the year.
Though a portion of the mop-up has already found its way into the bourses, fund mangers have, however, been waiting for the prices to cool off a bit before fully deploying the collected funds. Sensex will get a big push when that happens.
Brokers who have been holding international investor conferences in overseas locations like New York and Singapore are reporting huge interest levels in Indian stocks.
The number of Indian companies, especially mid-caps using these meets to show-case their financials are rising impressively.
Even old-timers who have been investing in Indian stocks for years are taking a renewed interest in India now with top level analysts and investment officers coming down for these meetings.
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