The BSE Sensex and NSE Nifty which plunged 12 per cent in the first-two months of the 2016 recovered smartly from there onward as benchmark indices surged 22 per cent during March-July 2016. The 30-share index jumped to 28,051.86 on July 29 from 23,002 on February 29. During the period, foreign institutional investors poured Rs 48,426.24 crore in the domestic equity markets against inflow of Rs 20,005 crore in the same period a year ago. The 50-share index Nifty on Monday crossed the 8,700 mark for the first time since April 16, 2016.
After the bull-run, market experts believe there are few risk which may dampened the rally going forward:
1) Rupee depreciation and selling pressure: Market experts believe any fall in rupee from present levels can dampen the party. Also selling by foreign institutional investors can further hurt market sentiments.
On the futher movement of rupee, Samir Lodha, managing director, QuantArt Market said, “Indian rupee can trade in the range of 66.50-69.00 in the next 3-4 months.”
2) Valuations: At present, markets are looking overvalued as the BSE Sensex was trading at price-to-earnings ratio of 20.54 times on July 29 against 10-year average of 19.27 times. Kotak Institutional in a research note said, “Valuations are expensive across most sectors and stocks barring a few areas where stocks are trading at or near our FY2018E-based fair valuations.”
3) Corporate Earnings: Any steep rise in crude oil as well as commodity prices may damage margins of India Inc. “Revenue and volume growth of India Inc has been disappointing in general.” said Kotak in a research report.
4) Passage of GST: The Cabinet is going to table crucial Goods and Service Bill this week. Any disruption in the passage of the bill may hurt markets.
5) Any turmoil in global markets going forward can hurt market sentiments.
Nirdosh Gaur, managing director and chief executive officer, Moneypalm said, “Any turmoil in global equity markets, increase in fiscal deficit, rise in crude oil price and depreciation of Indian currency may hurt market sentiment.”