Those who have followed me on CNBC-TV18 have known my bullish view for some time. The corporate tax rate cut was a game-changer and the market gave you a second opportunity when it gave up more than half of those gains. Now that the Indian market is at a new all-time high, it’s time to revisit my
first blog in the “13 series” which I had written on Dhanteras. I always believe that the new high is always a beginning and not an end. There is a basic reason any asset class takes out the previous high, the demand is far outweighing the supply and even at a new high, there are more buyers than sellers. With that as the background, let’s look at some signs which indicate that in two years, 12,000 will look like a great buying opportunity and not a missed chance: There is still disbelief about the rally: As recent as this morning, one fund manager told me this is only a liquidity-driven rally and it’s tough to be a fund manager in this market as you don’t have many good quality stocks at a reasonable price. With all due respect, this “missed out” feeling is one sure shot sign that market is not heavy at all. The troubled assets are being sold/resolved: One Achilles' heel for the market through the last year and a half was some of the unresolved issues. What’s happening to Zee? What would be the future of the IBC and the resolutions? What if more and more Essar Steel kind of disruptions take place? What about the telecom mess? Look at what has transpired this month. Almost everything has been resolved. This is a great sign for our market Deal Street is buzzing again: Zee’s promoter shares have been lapped up by investors. Yes Bank is in process of the second round of fundraising, even an RBL Bank is in process of getting some investors. Reliance is getting a big investment from Aramco. BPCL and Concor are getting sold. All these are signs that the market is willing to look forward and sees value in these deals Rise of the new sunrise sectors and stocks: It has been a dream year for new IPOs and new sectors which has given an opportunity to investors to look at something new and move away from the complaint that same set of 8-10 stocks are attracting all the money. FIIs are back: This month has seen FII inflow of over Rs 9,000 crore and counting. This follows October in which FIIs pumped in Rs 8,600 crore. Will there be a Rs 10,000 crore inflow in December? Who knows but signs are there that the FII money is chasing India again. Why is that important? This money buys stocks at market levels and is not bothered about 3-4 percent move. Market breadth has been reasonable: What worries me about any market rally is two kinds of advance/decline ratios: Either 1:4 or 4:1. We have seen both in the past. A 1:4 breadth in a rising market is clearly telling you that it’s distribution and a 4:1 market breadth is a recipe for disaster. All through this rally, the advance/decline ratio has been between 1:2 and 2:1 — exactly the kind of breadth you want to see (more 2:1 would be welcome). CNBC-TV18 anchors are not doing “over the top” celebrations: There was a joke in the market that if CNBC-TV18 anchors get involved in theatrics like cutting a cake or wearing T-shirts of new high or run shows like 'Bull Charge', that marks a near-term market peak. Thankfully, we have behaved ourselves this time. A new high is just a milestone among many to go.
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