Festive Cheer: We're 2-4 weeks away from markets touching all-time high

Mumbai: Conflict has caused short-term pain to markets but they have rebounded quickly in time and actually travelled farther.

This was seen during the Ukraine-Russia war and more recently last week during the Hamas-Israel conflict. Markets were hit just on Monday and then rebounded. This strong market performance can only be attributed to the strength that the underlying markets have and not to any other reason.

There are spin-off effects where oil prices have risen because of the conflict, but these should be considered as aberrations as they begin to hurt the larger segment and it takes its toll on the economy and economies. Gold is another volatile product and in times of conflict it is used as a safety hedge.

Coming to India and the stock markets, it appears we are currently in a sweet spot and likely to take advantage of the forthcoming festive season.

From Sunday we see the festival of Navratri beginning which would culminate with Dussehra and post that in about two weeks’ time we would have Diwali. These are times of celebration in the country and witness large spending across product categories like clothes, jewellery, white goods and automobiles, whether they be two-wheelers or four-wheelers.

Tourism also kicks in during this period and flow of money is at its peak. There will be added fervour this time with five state elections being held in the month of November and the same culminating with counting on December 3.

The markets, after having touched a peak of 67,927.23 points on the BSE SENSEX and 20,222.45 points on NIFTY on September 15, are showing the inclination to reach these levels all over again, if not crossing them.

The results season has kicked in with the Information Technology pack declaring results from the top three companies. While there is some concern, it is not alarming.

The mainstay of the NIFTY, banking or Banking, Financial Services and Insurance (BFSI) with close to 42 per cent weightage, is expected to lead from the front when results from the sector are declared next week.

The heavyweight in the sector HDFC Bank still has integration issues post its mega merger with HDFC Limited, which the markets have taken into stride post guidance.

Foreign Portfolio Investments (FPIs) were sellers, but of late that seems to have slowed down. Second, in absolute terms, their selling has been accounted for by aggressive purchases from domestic mutual funds that are being powered by massive Systematic Investment Plans (SIPs) from retail investors, which are at record highs.

With the retail sector flush with money and having made money, selling by FPIs is being more than adequately countered.

The markets seem set to take the current momentum and move ahead. Even last week, post the Hamas-Israel conflict, they stood their ground and bounced back quite nicely. They are on track to move ahead and conquer Mount 20K in the coming fortnight.

Thereafter, their target would be the all-time high of 20,222 points or higher. A good possibility in terms of timing for such an event, would be post Dussehra and before Diwali. Playing the Devil’s Advocate, what could go wrong, is, a slight delay and the time frame getting extended. Besides this, there appear to be no other issues.

Oil is a commodity which acts as a drain on the foreign reserves of India and could act as a dampener on the market rally. However, the momentum is strong and they should be able to surmount the negative movement if any.

Also, as far as the political front is concerned, there would be a lot at stake when the general elections for the Lok Sabha are held in April-May 2024. The current round of state elections could be termed as a precursor to the Lok Sabha elections, but the final always has a different aura about it.

In conclusion, the current market mood indicates that a retest of the present all-time high is on the cards and if all goes well, we could make a new high as well. In terms of timing, we are two to four weeks away from the event, though it could be even earlier. One should brace for the rise which would be accompanied by huge volatility and both sided movements.