Sensex ends at new high; braces for an 'explosive rally' ahead of polls

The markets didn't make much gains today, but they did hit new highs. The Sensex closed the day at 22,386.27; up 46.30 points, or 0.21%. It is the new closing high for the 30 stock index. The broader 50-share Nifty ended the day at 6,704.20; up 8.30 points, or 0.12%.
The Sensex made a fresh intraday high of 22,467; while the Nifty hit 6,730.

BSE midcap index closed the dat at 7,082.86; up 72.57 points, or 1.04%. The smallcap index closed at 7,071.96; up 72.90 points, or 1.04%.

The Sensex made a fresh intraday high of 22,467; while the Nifty hit 6,730.

BSE midcap index closed the dat at 7,082.86; up 72.57 points, or 1.04%. The smallcap index closed at 7,071.96; up 72.90 points, or 1.04%.

BSE IT index made a smart recovery towards the end of the session after trading in the red through the day. The index closed the day at 8,789.38; up 14.97 points, or 0.17%.

Outlook for the markets remains positive, say experts. The uptrend is likely to continue in the near term as India is better placed as investment destination than other emerging markets, they say.

The Nifty is in unchartered territory and is hovering around 6,700 level. Once this level is taken out convincingly, the chances become bright for the index to test 7,000 levels well before the election verdict is out, say experts.

FIIs were net buyers worth $1,728 million in Indian equities between March 21 and March 27. With this, their net investments for March stand at $3.3 billion. Their net inflows into Indian shares for 2013 crossed $20 billion versus $24 billion in 2012.

Dollar inflows in the Indian markets are also fuelling the Indian rupee, which breached 60 per dollar mark on Friday, and is holding firm.

"On the macro front, one of the first things to stabilise was the rupee and that gave a little bit of confidence to the markets, especially the foreign investors. So, with the stabilisation of the rupee and with the current account coming under control, we have seen a resumption of flows beginning to happen in the Indian markets," said Hiren Ved, Director & CIO, Alchemy Capital Management.

"Subsequently, we had seen the results of the state elections, which along with the various opinion polls have pointed towards a stable government coming up in May. These factors have fuelled the rally in the stock markets," Ved added.

Investors are factoring a stable government post elections and taking positions in sectors that are likely to benefit from improving economy. The market is likely to get crowded as elections get closer and an explosive rally can't be ruled out.

"Every fortnight, the market is just building up some gain because it will ensure that by the time we come closer to the election result date, there is no easy trade which is left. People will have to make brave calls for them to take further exposure if they want to bet up on the election outcome," said Rajat Rajgarhia, MD-Institutional Equities, Motilal Oswal Securities.

"Right now, opinion polls is what is dictating this trend but yes I would think that at least on the run up to the election results closer to that there are some more gains to be made here," he added.

Meanwhile, Ved feels that if nothing untoward happens globally and the momentum of flows continues the way it is, investors can expect an explosive rally before the elections.

"The markets are in a mode of pre-empting and my sense is that, if things continue the way they are, you could see 80 per cent of the moves at least in the short-to-medium run and before the event," Ved added.

Technical analysts are expecting the Nifty to soon hit 6,800-7,000 as oscillators are indicating the upside momentum to continue.

"Nifty is trading at the life time highs and broken a 6 year triangle pattern which shows an upside towards 6,800 levels. It is also trading above 9-dma and 20-DMA which indicates bullishness in short term. Higher highs and higher lows are being formed. Technical oscillators are also rising higher showing upside momentum," said EdelweissBSE -0.17 % report.

"We expect Nifty to rise further towards 6,800-7,000 levels. Our current short-term outlook is bullish," the report added.

According to Vivek Gupta - Director-Research, CapitalVia Global Research, Nifty April Future is further looking bullish on chart and every 20-30 points dip in Nifty should be a buy opportunity.

"We suggest traders to adopt same strategy again. Currently Nifty is hovering around 6,730, if it again comes around 6,700 level. Trader should use this dip & add further long position in portfolio for the target of 7,000. While on lower side it has a strong and immediate support of 6,640," Gupta added.

Meanwhile, the Indian Rupee has appreciated strongly in the last few trading sessions, largely due to strong inflow of foreign funds in to Indian equities on back of positive sentiments both on economic front and anticipated political scenario.

Positive data on Current Account Deficit along with fiscal deficit is one of the major factors boosting prospects for the Indian rupee. Selling of dollars by exporters and custodian banks is also acting as a positive factor for the domestic currency.

There are reports that the central bank doesn't want the rupee to appreciate and hence is intervening to buy US dollars.

According to Dr Arun Singh, Senior Economist, Dun & Bradstreet, the rupee is currently under-valued and must trade at 55/$ levels. However, the central bank will not allow it to go below 59.50 per dollar level, he said in an interview to ET Now.

He is of the view that RBI will intervene again if the rupee appreciates to 59 per dollar level.

"For the short term (one month or so), we expect the rupee to trade with a major support at Rs 59.0/58.0 and resistance seen at Rs. 61.0/62.0 against the US dollar," said Naveen Mathur (Associate Director - Commodity & Currencies, Angel Broking.

This article taken from Economic Times :

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