Anil Singhvi reveals 3 reasons that are boosting markets, maps way forward for investors
Global markets are witnessing the benefit of these 2 factors. There are very remote chances of interest rates moving up from zero even till 2023 in US market as indicated by Federal Reserve many times in the past. Also, to be borne on mind is the fact that 2nd or 3rd wave of Covid-19 may impact the economy further which means that interest rates may not go up from here. Infact, US Fed wants inflation to increase which will bring back the growth in the economy. So, when investors are aware that interest rates are going to remain low for next 2 or 3 years, US Fed will inform if interest rates are going to increase.
Things are really looking up, as far as stock market investors are concerned, and now they are looking at what the future holds for them and what is actually driving markets forward to new highs. Zee Business Managing Editor Anil Singhvi has highlighted the factors that are boosting markets - Zero Interest Rate in US till 2023, ample Liquidity and strong buying by FIIs.
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Yes, ample liquidity in the market system and low interest rates are two important factors that are driving the markets higher and higher. Global markets are witnessing the benefit of these 2 factors. There are very remote chances of interest rates moving up from zero even till 2023 in US market as indicated by Federal Reserve many times in the past. Also, to be borne on mind is the fact that 2nd or 3rd wave of Covid-19 may impact the economy further which means that interest rates may not go up from here. Infact, US Fed wants inflation to increase which will bring back the growth in the economy. So, when investors are aware that interest rates are going to remain low for next 2 or 3 years, US Fed will inform if interest rates are going to increase. Investors are not going to make money by investing in Fixed Income Instruments. This leaves investors with the option to invest in risky assets like equities which can help them to grow their money.
Also, investors are not extremely cautious about 2nd wave of Corona as they are aware the Vaccine is in the final stage of development and would be available in next 2 or 3 months. Investors have sailed through troublesome months this year from March 2020 to May 2020 due to lockdown. Investor sentiment will not remain extremely negative during 2nd wave of Corona as they were earlier this year. Once Vaccine is developed, life will return back to normal. Investors are more hopeful this time then being fearful, which was not the case previously during lockdown.
Economic Package will boost the sentiment of the consumers and the market participants. Stimulus will help the global economy to perform well going forward. Higher the economic package means better liquidity flow into the equity markets which will move into the markets higher from here.
After November, even yesterday’s FII’s buy figure indicated good liquidity flow into the markets. Huge MSCI buying happened into the Indian Equity markets in the month of November as expected. Rs 65000 cr buying by FII’s is indeed a huge number considering buying in a single month. Yesterday being the start of the new month, FIIs bought more than Rs 3200 cr of Equities in cash market indicating that such kind of buying from MSCI Index is not a one-off event, liquidity flow is extremely strong in Global Market as Global Phenomena and the mood of Investors across the Globe is favouring investing in Equities. Indian markets are benefitting as some portion of Global Liquidity is coming to India which is lifting the markets higher.
Strong liquidity flow, lower interest rate, bigger than expected economic package and economic recovery is expected sooner than later. People are less fearful of Corona and are more hopeful on the vaccine development. These all factors are the key reason why markets are moving up strongly and buying is coming at lower levels lifting the markets even higher than before.
Investors who have deep pockets, have believe and confidence are willing to take risk in this Bull Run are making the most of it while investors who are sceptical about valuations and strong rally are staying at sidelines. Markets are not going to go up every day, markets have a process in place to test the confidence of the investors who don’t have patience, traders and investors will book profit or their stop losses will get triggered, in case if there is little correction in the markets and exit the system.
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Indian markets are moving higher on account of strong rally in the Global markets. Many investors doubt that markets have moved much higher than its fundamentals and ground reality is not as good as it seems. Situation of Corona is much worse in US and Europe when compared to India; still those markets are trading at life time highs. Markets will continue to remain strong as far as the Global liquidity flow is good. It is difficult to predict when will the market reverse and from which levels. Overnight positions is the only major risk which participants cannot avoid as it is difficult to predict and understand.
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