Investors have to be cautious since the market is running ahead of fundamentals. If the rally sustains for long, there is the risk of sharp correction soon, says V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
With the Nifty setting new highs for the 6th consecutive session, India has become a clear outlier among global stock markets. It would be difficult for this rally to sustain since the global market construct is turning unfavourable with major weakness in the developed markets and rising bond yields, he said.
The US June jobs numbers expected today are expected to be much higher-than-expected and the market expects the Fed to raise rates in the July 26th meet and remain hawkish in its stance. This is the reason why bond yields are rising.
Unabated FPI inflows and participation of majors like Reliance and leading banking names can take the Nifty higher, he added.
A surge in new demat account openings happen during market rallies. This direct correlation between new demat account openings and market rallies holds good during the ongoing rally too. The sharp 15 per cent rise in the Nifty from the March lows and the news and stories surrounding the consequent wealth creation is attracting new investors. This trend will continue so long as the market remains resilient, he said.
There is a negative dimension to this retail exuberance. The new investors normally chase low-grade small-caps which slowly run into bubble territory. There are signs of this happening now. Seasoned investors normally take this as a sign of caution, he added.
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