Markets inched higher in the post budget week. Indices closed up about a percentage point and closed the week firmly above key levels – Nifty 8700 and Sensex 28000. The markets looked overstretched/overbought at current levels and may see a pull back in the days and weeks ahead. Result season should continue its due course and one will see a lot of individual company reaction to numbers. This result will also be crucial for many companies as these are first look earnings after demonetization. Also RBI policy will be a key event to watch out for besides tracking the global events and FII flows. Goa and Punjab polls have been finished and domestically speaking one will keep an eye out on the political picture as it develops.
The underlying sentiment in the market seems bullish and there are no available triggers globally that would trigger a pullback. Having said that fundamentally a 21-22x PE for the market has historically been considered as “high” and one needs to be cautiously bullish while taking positions. FIIs have been net buyers for the week and the month till date pumping about 555 crores in cash segment. Should this flow continue one will continue witnessing higher levels in the market.
Global market sentiment is also bullish. US markets look to be euphoric at current levels. Valuations are at historical high levels post Trump win. Volatility seems to have dissappeared from the markets altogether. A pull back in US markets is also awaited as the DOW has rallied a lot in the post election period.