Stock Market: Top 5 factors that would fuel bull run on Dalal Street
Sensex CAGR of approximately 13 per cent over 10-year time horizon proves that equity as an asset class has the potential to deliver best performance over the long-term.
The stock market of India witnessed heavy buying from the FIIs and the DIIs though the global indicators were not in sync. However, market experts were of the opinion that slide in crude oil was the major reason for fuelling the bull sentiment at Indian indices. As a result, both Sensex and Nifty crossed the psychological 40,000 and 12,000 levels, respectively. However, some experts are still bullish about the market and have their own reasons for it.
Here are the top 5 factors that would further fuel the bullish trend at the Indian stock market:
1] Crash in crude oil: The WTI crude price on Friday crashed around 6 per cent that led to a heavy selloff in the crude oil prices in the global commodity market. But, the slide is good news for the Indian economy as it would curtail the oil import prices and hence there would be less pressure on the government exchequers.
Anindya Banerjee, Analyst at Kotak Securities said, "Crash in crude oil price would lead to less government expenditure on the subside and hence more liquidity into the market."
2] Strong Rupee: Due to dip in WTI crude oil prices, government expenditure on oil imports would go down and hence the fiscal deficit which is targeted at 2.9 per cent of the GDP. Lowering fiscal deficit would lead to rupee rally against the US dollar in the Forex market.
Anuj Gupta, Deputy Vice President at Angel Broking said, "Due to slide in the oil prices we are expecting the fiscal deficit around 1.5 per cent of the GDP in April-June quarter though the targeted fiscal deficit for the whole year is 2.9 per cent of the GDP. So, in this quarter, rupee is expected to gain against the American dollar and in such case, the RBI may either decide to let rupee gain against the dollar or to start buying dollar from the market to increase its dollar reserves and keep rupee at a viable level against the US dollar."
3] Positive FII: Bond yield in the first world economy is quite low and hence the FIIs are looking at the emerging economies where China and India emerge as a better option for them. But, after the Sino-US tariff war, investors are hesitant to invest in the Chinese market. In such a situation, India is expected to get maximum FIIs attention in the current quarter if not more than that.
4] Positive DII: Domestic institutional investors (DIIs) were in a catch-22 situation in the last quarter as the Lok Sabha Elections 2019 was approaching. But, after the thumping majority being given to Narendra Modi by the Indian voters, the DIIs have a cue about ongoing policies to continue for next five years and hence they have started to pump money in the Indian markets.
Speaking on the re-election of Narendra Modi being a major factor in the markets and national economy Deepak Jasani, Head Retail Research, HDFC Securities said, "Whenever the election outcome is favourable, there tends to be a short term spurt in market returns. However, over the long term, markets seek direction from macro-economic indicators which highlight the overall health of the economy."
5] Blue Sky Territory: The Indian indices are at an all-time high and in the 'Blue Sky Territory' where they don't have to face any stiff resistance. As per the market experts, the Indian markets may remain buoyant until the forthcoming budget is announced in early July (barring unforeseen global negative developments). Post this, it may undergo a period of correction/consolidation.
Deepak Jasani, Head Retail Research, HDFC Securities says, "Sensex CAGR of approximately 13 percent over 10-year time horizon proves that equity as an asset class has the potential to deliver best performance over the long-term. There is ample evidence that long term investors are expected to earn impressive returns, irrespective of geopolitical or domestic events."
Hence, the market investors are advised by the stock market experts to keep the above five points in mind while taking an investment decision in the share market.