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Will the SENSEX Rally Hold ?

March 26, 2009

India’s strong 25%+ bounce from lows, +ve YTD performance, and recent peer market outperformance has been backed by – Near-trough valuations, Signs of growth revival and resilience in consumption demand, Rising monetary flexibility and rate reductions, Liquidity and stabilization of domestic credit market. FIIs have bought stocks more than Rs 3,000 cr in CASH in the current rally.

The summer will be the season of election and global risk pullback will have a more lingering effect. Will this Rally Sustain or was it just a spike ?

India’s bear markets have historically lasted 30 months on average, been longer than regional markets (21-23 months), and longer than India‚Äôs bull markets (bar the last). Is this bounce the beginning of a bull run? We think not, given India’s equity market lows are shallower, longer, and more in sync with its economic cycle. The market is more likely to crawl rather than spike out of its current trading band.

We expect the market to maintain a 9000-10500 (11x-12.5x) trading range and expect interest rate and rupee gains.

Yes its TRUE that we wrote about Elliot Wave’s 15 year bull market yesterday but that is something which Data according to Elliot Wave Theory justifies the current scenario. The outcome of General Elections is crucial to markets and Economic Policies and a broader coalition than the previous one implies SENSEX to be range bound.

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