Both the Nifty50 and BSE-Sensex ended a truncated week at their record highs but overall made miniscule gains. Benchmark indices are now steeply-priced even on the basis of two-year forward earnings expectations while the market cap-to-GDP ratio crossed the previous all-time high hit in 2007 earlier this week.
“We haven’t seen even a 5-10 per cent correction for quite some time now. So that could be on the cards in the next few months,” Andrew Holland, chief executive officer at Avendus Capital Public Markets Alternate Strategies told ETNow earlier this week.
Sanjiv Bhasin, director at IIFL Securities, echoed Holland’s thoughts but suggested that the market could be in for a deep correction as soon as the second half of this month given the sort of froth that has accumulated in recent weeks. “If you have positions on the trading side, try and hedge yourself but protect your profits,” he told ETNow in an interview earlier today.
However, some market participants believe that the current economic environment will make any dip in the market a buying opportunity. Brokerage firm Samco Securities argued, in a note, that all indicators point to a robust revival in demand going ahead.
With the festive period in full swing and the rural economy expected to do better on the back of decent monsoons, money managers are counting on a sharp uptick in demand in the December quarter.
That said, Ajay Srivastava of Dimensions Corporate Finance is of the view that retail investors are waiting on the sidelines to swoop in if there is a meaningful correction in the market.
“Whenever there is some pressure on sales coming from institutions or mutual funds in some order, it has been lapped up by the retail public. This is a very peculiar timeframe that we have seen and there has been no major institutional presence in the market in terms of incremental investment,” Srivastava told ETNow in an interview.
On the sectoral front, information technology stocks continued to dominate gains, perhaps hinting at some form of cautiousness among investors as banking stocks had another lukewarm week.
However, next week much of the focus will be on re-opening bets such as hotels and real estate stocks. Hotels stocks could see more traction after strong gains today as analysts pointed to robust revival in bookings for the upcoming travel season.
Real estate stocks, which have been the rank outperformers over the past two weeks, are expected to remain as the favourite of retail investors, given strong booking and declining inventory in the sector. Kotak Mahindra Bank’s move to offer home loans at 6.5 per cent per annum rate has also bolstered the optimism for the sector.
Samco Securities said that the Nifty50 index has witnessed a slowdown in momentum around its rising resistance line which may hint at possible reversion in the index towards its mean next week. “The trend continues to remain bullish and traders are advised to initiate long positions only around dips to minimize the risk of being capitalized at extreme levels,” the brokerage firm said.
Ajit Mishra, vice president of research at Religare Broking said that the Nifty50 index may be undergoing some form time-wise correction and a break on either side of 17,250-17,400 points could provide direction to the market.
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