After scaling fresh highs, markets may face volatility amid rich valuations
Stock markets would follow global indices for a new direction this week and may face volatility amid the monthly expiration of derivatives and rich valuations, analysts said.
BSE Sensex made history on Friday when it hit the 60,000 mark for the first time. Traders are seeing signs that India’s central bank is looking to drain record liquidity from the banking system, another sign that the global flow of easy money in the era of the pandemic may start to ease.
The Reserve Bank of India is increasingly shifting its forex intervention to the futures market to avoid injecting rupee liquidity, according to traders and economists, including Madhavi Arora of Emkay Global Financial Services Ltd. The monetary authority also reports a reduction in its outright obligation. purchases, or even eliminate them altogether, as of the next quarter, some of them said.
One place to start could be to control excess liquidity amid a huge influx into the country’s stock and bond markets, traders said.
It took just eight months for the BSE benchmark to cover the 50,000 trip in January this year to the all-time high 60,000 for the first time on Friday. The Sensex has gone from 1,000 points to the historic level of 60,000 in just over 31 years.
âThe roaring bull market continues in the Indian market with all the worry walls escalating where Sensex has crossed the new 60,000 mark. We are in a classic bull market like the 2003-2007 phase where this bull run is likely to continue for the next 2-3 years, âsaid Santosh Meena, director of research, Swastika Investmart.
However, he put out a word of warning after a parabolic move in recent days as a short term correction cannot be ruled out in the coming days.
Sharing similar sentiments, Motilal Oswal, Managing Director and CEO of Motilal Oswal Financial Services Limited, said: âWith high valuations, intermittent volatility cannot be ignored. . “
Vinod Nair, head of research at Geojit Financial Services, said the market is expected to follow the global guidance indices during a relatively calm week for the national economic data releases.
âThe September Manufacturing PMI to be released this week will help get a sense of business activity during the month,â he said. PMI data for the manufacturing sector is expected on Friday.
According to a note from Samco Research, âThe volatility seen in the markets last week could also seep into the coming week given the monthly expiration towards the second half.
“With growing concerns about the chip shortage and the resulting reduced sales outlook, monthly auto sales figures are sure to be a real eye-catcher in determining a future trend in auto inventory.”
Over the past week, the 30-stock benchmark has gained 1,032.58 points or 1.74%.
“It is a great achievement for India that India’s most sensitive index has crossed the 60,000 mark. In the coming month, news on corporate earnings would also help the market to recover. straighten out further, “Shrikant Chouhan, head of equity research (retail), said Kotak Securities Ltd.
The movement of the rupee, foreign institutional investors and Brent crude would also play a major role in determining market trends.
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