Strong Re to keep bull party going

MARKET WATCH

All indications available till date suggest the continuation of the bull party. The strong currency has changed the dynamics of earnings growth. Valuations are now looking attractive. With a meltdown in the Chinese markets in February and again last week, the international investors are betting on India as a better choice than China.

The US economy grew at a mere 0.6 per cent last quarter, the worst performance in the last four years. But the shares continued to rise to all-time highs on hopes the worst is nearing an end.

The Standard & Poor's 500 Index has surpassed its 2000 high, while the Dow Jones Industrial Average reached its 26th high for the year.

The Sensex rose by 232 points during the week, but is still 112 points away from the all-time closing high and more then 200 points away from the all-time high. There are expectations that Sensex will surpass its all-time high before the long awaited correction sets in.

The last week's GDP figures were the highest in 19 years and inflation was at five per cent.

Hence, the market does not expect the government to take any irrational measures aimed at curbing inflation.

The government is closely watching the situation, though. Last week, the centre increased the quota for open market sale, though the sugar prices are low. It has maintained the tariff value of edible oil, contrary to market expectations. The decision on reducing the minimum prices for onion exports in the face of the falling prices has been differed.

The call money rates are at a historical low, suggesting ample liquidity in the system. If this situation continues, there could be restrictive measures on the monetary front. Else, everything looks fine.

There is enough liquidity in the market, thanks to the foreign inflows. The mega issues, particularly that of DLF, will get a good response if marketmen are to be believed. The market will see a correction only after mid-June.

The derivatives data suggest that the open interest is at an all-time high. But this is because new stocks were added recently. The rollover was smooth and the rolling over of long positions is a cause of optimism in the market.

The cement and construction stocks witnessed strong rollovers, while the rollovers were weak in sugar, oil & gas, and pharma. The derivatives space will be interesting to watch in the coming days as the NSE has commenced derivatives trading in two new indices and the derivatives volumes on BSE are also picking up.

The market is looking good technically as well. Both, the Nifty and Sensex, are expected to continue their upward journey. The Sensex is also looking to cross its all-time high.

In case of NIFTY, a close above 4318 will confirm further upside, and the next targets will be 4365 and 4385.