New lifetime highs round the corner

The period under review 20th May to 26th May, saw markets rise on three of the five trading days with a sharp jump on Friday, when BSE SENSEX rose 975 points and NSE NIFTY gaining about 266 points. This movement has set up the benchmark indices on track for making lifetime highs sooner than later. BSE SENSEX gained 1,114.88 points or 2.19 per cent to close at 51,017.52 points while NIFTY gained 271.45 points or 1.77 per cent to close at 15,301.45 points.

Lifetime highs on the BSE SENSEX are at 51,259 points and 15,431 points on NSE NIFTY achieved on 16th February 2021. We are almost there and tomorrow being Nifty futures expiry for May series, could be touch and go. It makes little or no difference whether the new high is made on expiry day or a couple of days later.

One could be wondering as to what is happening in markets in India and globally in the middle of the pandemic. Dow Jones is trading at a lifetime high and India is almost there. The 2nd wave of Covid-19 had hit us quite badly but seems to be now under control with daily increase in patients from over four lakhs now down to under two lakhs.

Globally fund flows seem to be never ending. The US government is pumping money and the economic stimulus just continues. While there are minor fears of inflation in the US and Joe Biden taxing the superrich, it hasn't affected markets.

In India, corporate results have shown resilience and performance improved significantly. Companies have learnt how costs can be controlled. Travel and travel related expenses have come down significantly and companies are more than happy with the outcome. FMCG and consumer companies where travel was always considered a way of life have also adopted WFH (work from home) with unbelievable savings and performance.

The bulls have complete control of the markets and there are many factors which support them. FII or FPI continue to invest in India and though we often hear that the markets are richly valued; they still find enough pockets of interest and have been net investors. Secondly the second wave of Covid appears to have been arrested in a major way and the infrastructure has improved significantly in the intervening period. Thirdly the monsoon forecast is positive and we should have a normal monsoon this year. Fourthly, inflation is under control and interest rates are quite soft. Further there is enough liquidity in the system in India to spur growth as and when lockdown is lifted.

There is a possibility of a third Covid wave happening and hopefully we would be well prepared for the same as and when and if it does happen. The fact that there is a huge trust deficit about China post the pandemic, more and more companies globally are putting in place a policy of China + one supplier. India is an automatic choice for the one spot and we are seeing traction on this front.

Coming to markets in the period 27th May to 3rd June, they will be choppy and volatile for sure. Firstly, May futures expire on the first day of the period itself. Bulls have taken control of the series, and the same is currently up by 406.55 points or 2.73 per cent. With nothing to lose, bulls would go all out to push the pedal. Thereafter, trading for June series would begin on a new slate and the immediate target would be the lifetime high levels on the indices if not already achieved. Once this is done, there could be some pause in the markets to digest the gains and get accustomed to new levels unseen before. That would still give us another six months before the calendar year ends and the possibility that markets move another 5-7 per cent in that period looks plausible. Enjoy the new levels as they are a sense of achievement.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)