After a good rally, and the indices hitting an all time high, you could see some profit booking in today’s trades. The Open is likely to be on the higher side but there could be a tough fight in the minds of investors who would want to book a part of the profits before trading resumes on Monday for a confirmation of the continuity of optimism. Right now there is nothing to disturb the party. Invest safely and have a nice weekend.
Even as the elections were announced, in came the trade balance and CAD numbers to further charge the bulls. The result was a new intraday and closing high for the benchmarks. The rally is basically a combination of multiple factors including the improving global situation on all fronts. Russia is calm, the US economy is ticking and Europe has not come up with any new trouble points. All these have provided FIIs with the leverage of going into risk on trades with full conviction.
The rush of FIIs has triggered a pre-poll rally and the improving CAD situation which is surprisingly lower than what was expected. A higher demand for the rupee vis-à-vis the dollar has helped it gain strength. The currency was closed at a three-month high level yesterday. This further helped in bolstering the optimistic sentiment of the markets.
The pre election rally basically comes from the overall change in the thinking of the market. Bets are largely being placed on the election of a pro-business leader at the helm of affairs. A decisive leadership at the top could better business prospects and foster higher economic growth. This hypothesis has been doing the rounds for quite some time now. With the dates inching closer, and the drumbeats getting louder, the markets will get more euphoric going forward.
Spelling out a word of caution on avoiding the euphoria and keeping your heads and nerves under control may sound like depriving investors of participating in the rally. In fact, the collective force of the charged environment could see indices hit multiple records in the coming months. But investors who can lend their ears to the small important sounds in a cacophony are far safer than those who blindly follow the herd. Right now, all seems to be good.
A very important observation about the improving CAD situation is about the NRI deposits. Net NRI deposits received during the December quarter stood at USD 21.3 billion. This is reportedly the highest ever number recorded. For an economy and its markets which are billed to be dependent on FII inflows, this comes as a big relief. NRI money coming back is permanent in nature. Unlike FII flows which are susceptible to quick withdrawal on events, this money is back to stay. Hence the improvement in the CAD is more or less on a stronger footing. The markets have been shrewd enough to have recognized this fact.
We seem to be heading for a good weekend. Globally markets have rallied well on the basis of economic data points and central bank actions. US stocks have been rising higher with investors remaining focused on the speeches of many of the Fed officials. This coupled with some encouraging numbers of the employment front has helped markets move up decisively in the US. The ECB on the other hand has left interest rates unchanged, but investors were more concerned about absence of measures to tackle lower inflation in the Euro zone. Bank of England too has left its policy unchanged and left interest rates at record low levels pushing up the benchmark indices there.
Asia except for Malaysia is all green today. China and its twin Taiwan are leading the way with benchmarks trading an average 0.75% higher than their previous close. Japan is following closely with the Nikkei up 0.60% in trades until now. Indonesia and Korea have been trading quite normal with an average 0.30% rise in their indices, followed by Singapore and Hong Kong where the Straits Times and the Hang Seng are currently trading quite flat.
After a good rally, and the indices hitting an all time high, you could see some profit booking in today’s trades. The Open is likely to be on the higher side but there could be a tough fight in the minds of investors who would want to book a part of the profits before trading resumes on Monday for a confirmation of the continuity of optimism. Right now there is nothing to disturb the party. Invest safely and have a nice weekend.
