Analysts expect small correction, ask investors to remain cautious before Budget

Wealth management funds are sitting on a huge pile of cash and waiting for a correction to put in money in the market, says an analyst

The markets rally will continue if corporate earnings and economy keep up with the growth rate. Image source: PTI

Even as the stock market is at historic high, analysts advise investors to be cautious ahead of the 2018 Union Budget as they expect some corrections in the near future.

Wealth management funds are sitting on a huge pile of cash and waiting for a correction to put in money in the market, said Rajat Sharma, CEO and founder of Sana Securities.

According to him, the market is extremely overvalued now and still rising because there is huge cash with investors. This is the highest ever rise in such a small period since the Harshad Mehta scam in 1992.

"However, I believe the market will not fall more than 5% because people now want to invest in stock market. As long as there will be buyers' interest in stocks, the market will not see big corrections," he said, adding "Post 2008, stocks were very cheap still people were not interested in investing in the stock markets but now despite high valuations."

"I see the market touching the 40,000 mark or may be above that," Sharma added.

Deepak Jasani, head of Retail Research at HDFC Securities, said the turnaround in the Industrial/economic growth in October 2017 along with big policy announcements related to bank recapitalisation and Bharatmala, a Centrally-sponsored and funded road and highways project, led to a good upmove in October 2017.

“In Jan 2018, we are witnessing foreign institutional investors (FIIs) returning to the buy side in a big way after a break. The forthcoming Budget could aid in determining the future direction of markets from here on,” Jasani said.

Deven Choksey , Managing Director at KR Choksey Investment Managers, said on Zee Business that the market rally will continue, however, investors should be little cautious ahead of Budget.

The markets rally will continue if corporate earnings and economy keep up with the growth rate. There might be some correction but in the 2-3 years down the line the market will be much higher than this.

The domestic market today closed at fresh peaks with the Nifty50 sailing past the 11,000 mark, while the Sensex breaching the 36,000 level for the first time ahead of the derivative expiry of January series due on Thursday.

Gains came after an International Monetary Fund (IMF) report showed India was set to regain the title as the world’s fastest growing major economy in 2018-19, beating China.

IMF on Monday revised up its forecast for world economic growth and said that it expected a strong Indian economy to offset decelerating growth in China.