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Bull Run continues, but experts warn of correction

Monday, November 06, 2017
By Dominic Rebello

Last week the benchmark indices BSE Sensex and Nifty 50 continued to touch fresh highs for most of the days in the week. The Nifty gained 129.45 points over the week to close at 10452.50, while the Sensex zoomed  528.34 points during the week to close at 33,685.56.

The country's jump in World Bank's business ranking on ease in doing business, coupled with positive corporate earnings, stable rupee and the government's stimuli to PSU banks boosted the sentiments of investors.

Foreign investors (FPIs) too turned net buyers in October and invested over Rs 3,000 crore in stocks. The latest inflow followed a net pullout of Rs 24,000 crore from stock markets in the past two months (August and September). Prior to that, FPIs had invested over Rs 59,000 crore in equities between February and July. According to depository data, foreign portfolio investors (FPIs) infused a net sum of Rs 3,055 crore in equities last month.

“All round buying lifted Nifty50 86 points this week to close new lifetime high of 10452. On the valuation front Nifty50 is trading at trailing price-to-earnings multiple of 26.3 x,” said Arpit Jain, AVP, Arihant Capital Markets.

Impressive quarterly results and government reforms boosted the market sentiment. Moreover, World Bank has increased India ranking on Ease of Doing Business from 130 to 100 which had a positive impact on the sentiment as it will enhance foreign investment in India. The focus will continue to be on results in this month. Sectors like PSU Bank, Infra and Pharma will be in focus, he added.

Major companies which will announce Jul-Sep quarter earnings this week include Century Textiles, Indian Bank, PEL, REC, BHEL, Cipla, Ashok Leyland, Bharat Forge, CESC, Voltas, Aurobindo Pharma, HPCL, Jindal Steel and Power, SAIL, Tata Motors, BPCL, M&M, Oil India, SBI, Coal India and Larsen & Toubro.

"Sentiment continues to be positive. However, rising crude prices remains to be a concern for the Indian markets," said Anita Gandhi, Whole Time Director, Arihant Capital Markets.

"In the near term, market will continue to gauge on the ongoing Q2 results," said Vinod Nair, Head of Research, Geojit Financial Services.

"The results season is in the middle of completion. Mixed numbers have come out. No clear trend is emerging to state forcefully that all is well with the economy. Some pockets are impacted but some are still unclear what would be the impact of GST/demonetisation," said Jimeet Modi, Founder & CEO, SAMCO Securities.

Micro Finance companies are still reporting no growth and reporting losses, how the future will shape up for them only time will make it clear. IPOs are being lined up as if there is no tomorrow. Such massive army of IPOs lined up to suck the liquidity from the secondary market does not portend well for the bulls. Aggressive purchases should be done only if the market falls heavily to sudden knee jerk reactions otherwise stay away, Modi added.

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