21.1.15

Sensex, Nifty hit lifetime highs!


Optimism over the economy and prospects of lower interest rates helped domestic stock indices scale fresh highs even as China announced that it had grown at 7.4% in 2014, its slowest pace in 24 years.
The feel-good factor in Indian markets was bolstered by the IMF projection that India will outpace China’s growth by 2016-17.
The sensex closed 1.9% up at 28,784 while Nifty ended up 1.7% at 8,696.

As China has lost steam with loans going bad and getting punished for profligacy during the financial crisis amid a slump in investment, so has India been regarded with greater approbation ever since Narendra Modi led BJP to victory on the promise of policy changes, economic revival and job creation. China said on Tuesday it grew at 7.4% last year, the slowest in 24 years.Meanwhile, since May , India has rolled out reforms and sought to boost investor sentiment.

The response to that and various other global triggers has not been smooth or linear since the beginning of the year though.While the Sensex has risen about 1,285 points or 4.7% since January 1, foreign institutional investors (FIIs) have actually been net sellers of Indian equities to the tune of ` . 100 crore. It's only been in the last three days that they've rushed back in, pumping about . 2,913 crore into stocks. The slide ` in prices of oil and other commodities has also helped. “The good news is that when the world is slowing down, India is coming out of a growth slump,“ said Rashesh Shah, chairman, Edelweiss Group. “I think from here onwards, India's growth will accelerate as lower oil price solves lot of problems for India in terms of lower inflation, fiscal deficit, rupee and current account deficit.“ The government is looking to revive the economy that hit decadal lows in the past two fiscal years. With the World Bank having also said last week that India will overtake China — in calendar 2017 — overseas portfolio investors to domestic fund managers have all turned their focus on India ahead of the European Central Bank meeting on Thursday, when it’s expected by many to embark on a round of quantitative easing. Other calendar items that have come under scrutiny are the visit of President Barack Obama to India later this week and the union budget at the end of next month. But while FIIs have started preferring India stocks among those of emerging markets, domestic investors are feeling crowded out, underweight as they are on equity as an asset class.

The IMF said India’s gross domestic product is likely to grow at 6.3%, marginally down from 6.4% projected in October, in the next fiscal year and 6.5% in year to March 2017, which will be the third year of the Modi government. The World Bank projected India to edge past China in calendar 2017, clocking 7% growth compared with China’s 6.9%, it said on January 13. Equity investors are gaining confidence that worries over inflation are receding and growth could gain momentum. This assurance has been underscored by Reserve Bank of India governor Raghuram Rajan making a surprise reduction in the policy rate last week.
Investors would be advised to proceed with caution, according to those who follow the technical charts. These seem to show that the market is approaching an overbought zone. The 14-day relative strength index (RSI) has reached 68.99 — a reading of more than 70 is construed as overbought territory. On the RSI scale, the Nifty has rallied from oversold to near overbought in just a month. The Nifty put-call ratio has reached 1.33.
Historically, markets are believed to have peaked out if the put call ratio is 1.30-1.35. The put-call ratio refers to the outstanding open interest in a put option divided by the outstanding open interest in a call option. Also, the rally seems to be concentrated in a few stocks as shown in the advance-decline ratio, which reflects a large number of stocks dropping.
Tracking the momentum, as much as 102 stocks surged to hit their life-time high on Tuesday, including Axis Bank, ICICI Bank, HDFC Bank, Tata Motors, Nestle, Ambuja Cements, HDFC, MRF and YES Bank.
Market participants seem to be confident that the ECB will announce a full-scale bond-buying programme, with some of the resultant liquidity finding its way into Indian markets.
But this will also be dependent on the government tackling various ills.
On the domestic front, the market is building in a lot of optimism ahead of the union budget, which is expected to contain an array of reform measures to help push growth, said experts.

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