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The last three months Sensex has had a dream run, this run has made many investors confused and many off them are feared by the way the market is moving, Analyst predictions are not happening and they are also confused by the way the market behaves. The Indian stock market is driven by sentiments (I’m not sure about other world markets).

The valuation that the market has for a particular stock would be much higher in the bull run and so they keep up to the price, but we should remember that nothing has been changed, with the company and the global economic situation. When the market is in a bull run they have the tendency to ignore minor negative news and continue its run, but if this stops it would be a signal for a sharper correction. The FII’s are another attraction of the market, they have pumped in over 4 billion USD this year. FII’s are quite bullish on the emerging markets, since they have the power to out perform even the developed markets. The Rupee strength also add to its advantage. 

The formation of a stable government has brought cheers to the markets. The business houses are expecting economic reforms from the new Govt. The expectation about the budget is also high this time with the investors. Since the economic situation globally has witnessed some minor positive changes its likely that the first quarter results would bring in more positive numbers. 

51THmBeRFXL. SL160  Where would the Market go?

Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics)

Analyst warns that some signs have shown the bottoming out of the recession but the GDP growth for the developed countries are yet to come out, so a caution can be taken in this regard, Investors should closely watch the global situations since they have the power to ruin the domestic party. There is an high possibility of a correction since the markets have rallied nearly 70%. The Union budget would not be able to live up with the industry expectations, could also trigger a setback. Its advisable that you could book your profitable positions by half, and wait for the Union budget or for the correction. If you are planning to enter into fresh positions its a wait and watch situation, a correction is surely on the cards.  

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