Dalal Street Stays Hot

The bullish momentum in Indian equities that catapulted the Nifty above17,000 and the Sensex past 57,000 for the first time ever on Tuesday could last a while.

The optimism stems from the sharp record-breaking run in the markets in the past two days after the US Federal Reserve’s dovish stance on tapering of bond purchases alleviated concerns of aggressive liquidity tightening.

On Tuesday, the NSE Nifty rose 201.15 points or 1.19% to close at 17,132.20. The BSE Sensex gained 662.63 points or 1.16% to end at 57,552.39. Both indices have gained about 2.5% this week so far, shrugging off recent concerns about markets being overheated.

All the poll participants recommended holding 60-70% of investor money in equities. Fund managers said large caps are likely to outperform mid and small-cap shares in the months ahead.

Till July, small and midcap stocks performed better than blue chips, buoyed by a flood of retail investor money. That’s reversed in August with many smaller shares witnessing a sharp sell-off. The Sensex gained 9.2% in August. The MidCap index moved up 3.3% and the SmallCap index declined nearly 0.5% during the month, while many smaller stocks have fallen at least 20-30% from their highs in July.

Since January, the Sensex has run up almost 20.2%, while the MidCap index is up 31% and the SmallCap index has gained 47%.

The Nifty is trading at an estimated price to earnings ratio of 21.5 times, which is at a 68% premium to emerging markets, the highest in the last 10 years, said Nomura in a recent note.

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