It’s been a great run for the Indian stock market for seven consecutive weeks. Nifty had managed to end above 15000 on Feb 23rd and continued the momentum until today, when it took a pause after reducing over a 100 points. So, what should investors expect for the future?
The main driver of this rally was the onset of the coronavirus vaccine rollout. The sentiment in the markets had turned positive after the government’s announcement of the vaccination program and investors had become more confident enough to put their money to work. This has been seen in sectors such as banking, automobile, real estate, retail, IT, and more.
But with the second wave of coronavirus infections set to hit India anytime now, the near-term outlook of Nifty does look uncertain. Increasing cases are putting pressure on lockdown measures across different cities and states which has led to a delay in economic activities; this could result in a slowdown in economic revival.
On the other hand, the relief packages of the government, higher rural incomes, and greater spending due to the festive season have provided support to the markets. A fall in bond yields, and expectations of more stimulus in the upcoming budget 2021 have been the underlying catalysts driving the markets.
Moreover, foreign institutional investors (FIIs) have been pouring money into the Indian market despite recent pullbacks and this has provided a little stability to the markets. FIIs increased their stake in Indian equities by 11.5 % in January 2021 as compared to December 2020 and this has helped Nifty to sustain at the 15K levels.
In conclusion, looking ahead, it’s important for the investors to remain focused on the fundamentals and take into account the drivers behind the market movements. The situation related to the pandemic is ever-changing, and there could be an uncertainty around the short-term outlook but taking the long-term view into account should be the key for investors.
