The market has been showing positive signs for the past few days. But are these enough to believe that markets are in an uptrend and have made a break out? Well most experts would like to believe so.
After days of volatility the markets are showing a definitive uptrend. This is turning out to be helpful in improving the overall retail sentiment and also getting rid of the lingering fear of uncertainty in the markets.
With the FOMC meet out of the way and the Fed having paused its hike, the Indian market is breathing in some fresh air and is in fact also discounting a lot of negative domestic news. The Sensex closed up 130 points on August 9 and is back up in the green today.
Experts believe that this trend is atleast helping them raise the base levels of the market.
Investment advisor, S P Tulsian says, "Fear of the downside has been arrested for now, and I can say that now at least, the Sensex is not likely to move below 10,500, that is the base now. The Sensex seems to have decisively crossed the 11,000 level."
He also adds that negative news on the international front has abated, sole exception being crude, but that has also been factored in, market sentiment is looking quite positive now.
Interestingly, some experts term the markets move of the last few months as a 'Bernanke trough'. Amit Dalal of Amit Nalin Securities says, "I think when history will be written about this period from May 18 to now, it will be called 'Bernanke trough'. Now the market has gone up by almost 1,200 points since Monday before last and it is quite a strong rally, markets are back with a bang."
According to Tulsian, positive domestic news such as sugar policy, ethanol prices, and news on the real-estate front with SEZs getting clearance has all lead to the positive sentiment in the market.
"Midcaps appear to be making a come back, and that can be attributed to all these positive news events since most midcaps happen to fall in these spaces. While midcaps usually take the highest beating, their bounce back is also as huge."
Agrees Dalal, he too feels that market attention will definitely move towards midcaps now.
"Traders in the retail market will start looking at opportunities in midcaps now.
Technical analyst Rajat K Bose also has the same view, he concurs that midcaps are showing strength now.
"Lots of midcaps are actually showing quite a bit of strength. So we may actually see midcaps taking over the baton from the largecaps. That's why the indices maybe a bit flattish. The sugar pack and maybe among the largecaps as well as the midcaps some movement could be quite likely in the capital goods space as well. The technical set up there is also pretty encouraging."
However, one question looming large on the markets is whether it will be able to reclaim its old highs and move ahead. What does the year-end target for the Sensex look like?
Tulsian gives a year-end target of 11,500 level. He says, "I would put the year-end target that is till December, 31, at 11,500 level." He says that he isn't being pessimistic but is looking at the overall scenario. He feels it is more important to note that every time the market moves higher, it's base is also elevated, which is 10,500 at this point according to him.
Dalal feels that the answer to this question will depend on FII flows.
"In the last 15 days we had a rally up but we have hardly seen any flows. I have not seen such dismal flows in a longtime. If flows will not follow, the market will find it difficult to go much higher from here. If there is any excitement on re-allocating money towards equity because of what happened in terms of no change in interest rates, then more money will come into emerging markets and will end up as a good case for a strong rally from here. But otherwise this rally will just remain range bound. The range I mentioned last time was 10,500 to 11,500 over a period of two months and I think that is where I stand with my call for the market right now."
So, with the markets making their way up once again, experts are confident this is a positive break out. It is time to focus on midcaps, which are raking in the gains for now, they say.
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