The Dalal Street frenzy is more than a pre-poll rally. Across global markets, money is moving from bonds to equity with India attracting a fat slice. And, the market is hitting new highs despite huge selling by large local investors. "It's a story of high liquidity and low floating stock. Buybacks, open offers and absence of IPOs have shrunk available stocks while certain sectors such as banks were oversold," said EdelweissBSE 1.82 % Capital Chairman Rashesh Shah on Monday, when the BSE Sensex closed above 22,000 for the first time.
Punters took hectic derivative positions, betting that the market would chug ahead. The Sensex surged 300 points (or 1.38 per cent) to 22,055, its highest closing. The broader NSE Nifty rallied 88 points, or 1.36 per cent, to end at a record 6,583. "People are under invested... HNIs are beginning to invest, retail money is yet to come in," said Shah. Buoyed by hopes that RBI Governor Raghuram Rajan will hold rates and maintain a dovish tone in the April 1 monetary policy, shares of HDFC BankBSE 0.91 % and ICICI BankBSE 0.29 % led the rally.
Oil and gas stocks such as ONGCBSE -3.80 % and GAILBSE -0.93 %, where investors are betting on generous interim dividend, fuelled the rally. People like Tai Hui, JPMorgan Asset Management's Asia strategist, believe RBI "is done for now in terms of hiking interest rates".
Since mid-February, FIIs have pumped in nearly Rs18,500 crore into equities. On Monday, they bought stocks worth Rs 1,465 crore. The interest shown in Axis BankBSE 0.22 % supported sentiment. "Activity in the derivatives segment of the market attested to a continuation of Monday's rally," said Siddharth Bhamre, derivatives head, Angel Broking. Option writers or sellers sold huge numbers of 'put options' — an indication of their confidence that markets are unlikely to dip from current levels. This is borne out by FII net sales of index options worth Rs780 crore.
Defensive sectors such as pharma and IT were under pressure with WiproBSE -0.88 % ending 0.98 per cent lower at Rs563 and Dr Reddy's closing 1.34 per cent down at Rs2,749. Here, the bet is that a stable government would strengthen the rupee and squeeze exporters' earnings. "The markets are expecting a decisive mandate in the general elections, and if results are favourable, then Nifty can touch 7500 over next 12 months," said Motilal Oswal, chairman at brokerage Motilal Oswal Financial ServicesBSE -5.69 %. The market sentiment turned positive ever since opinion polls suggested that BJP may win 210-230 seats in the parliamentary elections.
Global investors such as Goldman Sachs recently upgraded India to 'overweight' from 'market weight' and has raised Nifty's target to 7600. The brokerage expects domestic fundamentals to improve on recovery of economic growth in April-June quarter (Q1 of FY15), and views midteens corporate earnings growth this year and next year. "Markets are rising only based on India's economic fundamentals, which are the best in the world currently," said Shankar Sharma, chief strategist, First Global.
"However, the real risk for the markets will be post elections as BJP may find it difficult to manage allies. If there is a BJP-led coalition government at the Centre, it would be fragile. Even if NDA gets 220 seats, which is the average consensus among analysts, they would have to make do with difficult allies."
Artcle taken from ET: http://economictimes.indiatimes.com...n-narendra-modi-wave/articleshow/32619856.cms
Punters took hectic derivative positions, betting that the market would chug ahead. The Sensex surged 300 points (or 1.38 per cent) to 22,055, its highest closing. The broader NSE Nifty rallied 88 points, or 1.36 per cent, to end at a record 6,583. "People are under invested... HNIs are beginning to invest, retail money is yet to come in," said Shah. Buoyed by hopes that RBI Governor Raghuram Rajan will hold rates and maintain a dovish tone in the April 1 monetary policy, shares of HDFC BankBSE 0.91 % and ICICI BankBSE 0.29 % led the rally.
Oil and gas stocks such as ONGCBSE -3.80 % and GAILBSE -0.93 %, where investors are betting on generous interim dividend, fuelled the rally. People like Tai Hui, JPMorgan Asset Management's Asia strategist, believe RBI "is done for now in terms of hiking interest rates".
Since mid-February, FIIs have pumped in nearly Rs18,500 crore into equities. On Monday, they bought stocks worth Rs 1,465 crore. The interest shown in Axis BankBSE 0.22 % supported sentiment. "Activity in the derivatives segment of the market attested to a continuation of Monday's rally," said Siddharth Bhamre, derivatives head, Angel Broking. Option writers or sellers sold huge numbers of 'put options' — an indication of their confidence that markets are unlikely to dip from current levels. This is borne out by FII net sales of index options worth Rs780 crore.
Defensive sectors such as pharma and IT were under pressure with WiproBSE -0.88 % ending 0.98 per cent lower at Rs563 and Dr Reddy's closing 1.34 per cent down at Rs2,749. Here, the bet is that a stable government would strengthen the rupee and squeeze exporters' earnings. "The markets are expecting a decisive mandate in the general elections, and if results are favourable, then Nifty can touch 7500 over next 12 months," said Motilal Oswal, chairman at brokerage Motilal Oswal Financial ServicesBSE -5.69 %. The market sentiment turned positive ever since opinion polls suggested that BJP may win 210-230 seats in the parliamentary elections.
Global investors such as Goldman Sachs recently upgraded India to 'overweight' from 'market weight' and has raised Nifty's target to 7600. The brokerage expects domestic fundamentals to improve on recovery of economic growth in April-June quarter (Q1 of FY15), and views midteens corporate earnings growth this year and next year. "Markets are rising only based on India's economic fundamentals, which are the best in the world currently," said Shankar Sharma, chief strategist, First Global.
"However, the real risk for the markets will be post elections as BJP may find it difficult to manage allies. If there is a BJP-led coalition government at the Centre, it would be fragile. Even if NDA gets 220 seats, which is the average consensus among analysts, they would have to make do with difficult allies."
Artcle taken from ET: http://economictimes.indiatimes.com...n-narendra-modi-wave/articleshow/32619856.cms
