By Rohit Vaid
Mumbai, Feb 16 (IANS): India's barometer equity index -- S&P BSE Sensex -- is expected to reach the 55,000-point mark within a short span of time, as investors bet big on the economy's fast paced recovery out of the recession triggered by the Covid-19 pandemic.
Accordingly, the Union Budget 2021 along with positive quarterly results pushed the benchmark indices to their record highs this month.
Besides, expectations of greater Central government spending followed by crowding in of private sector capital will lead to healthy consumption and higher profitability of Indian Inc.
However, rich valuations as well as lower foreign inflows and selective profit booking have considerably slowed the market's advance.
Nevertheless, even volatility induced via profit booking is not hampering the market's up moves as every dip is seen as a buy in opportunity into the never ending bull run.
"While the 55,000-mark does not seem too far away, we need large consistent inflows from FPIs to reach that level. Some positive local and or global triggers may help in achieving it," said HDFC Securities' Head of Retail Research, Deepak Jasani.
"Vaccine rollout and expectation of a large US stimulus is mostly built into the prices at these levels. However, if we see a second wave of Covid in India, there could be some nervousness like that felt in the European countries," he added.
Lately, global flood of liquidity along with near zero interest rates in foreign markets, a faster-than-anticipated domestic macro recovery, expectations of healthy Q3 results and an expedited vaccine rollout programme accelerated FIIs' investments into the market.
"If the existing optimism continues to prevail in the market, it is very likely for Sensex to test its level of 55,000 in the near term," said Gaurav Garg, Research Head, CapitalVia Global Research.
"If the firms come out with strong Q4 results and the budget proposals start unfolding as perceived, then the investors' sentiments are expected to get uplifted leading the benchmark index to test its level of 55,000," Garg added.
Over Rs 40,000 crore or $5.5 billion were invested in the equity market segment from January till date.
In calendar year 2020, India received $22.5 billion or Rs 1.7 lakh crore worth of FII money for equities.
"FPI flows continue to be strong. Now foreign investors are overweight India vis-a-vis most emerging markets because India now has the best growth recovery story," said Geojit Financial Services' Chief Investment Strategist, V.K. Vijayakumar.
"The incredible decline in Covid incidence in India is a strong positive factor for Indian markets. Q3 results indicate an earnings upcycle. If this sustains like in 2003-07, markets may even scale higher, despite the high valuations.
"But it is important to appreciate the fact that valuations are high and at high valuations markets are vulnerable to sharp corrections. Corrections may be triggered by some presently unknown factor," Vijayakumar added.
Furthermore, India is expected to come out with a mild GDP growth figure for Q3FY21. Additionally, India Inc is widely expected to come out with another round of healthy quarterly results and earnings upgrades.
"Currently, the market is focused on the sharp economic rebound that we are seeing in the domestic economy and the likelihood of earnings upgrades following better than expected Q2 and Q3 corporate results. Markets move on expectations and realignments happen only if there is a significant divergence between the expectations and the actual numbers. Therefore, if the markets are moving up it is not without a reason," said Joseph Thomas, Head of Research, Emkay Wealth Management.