Today, the key indices could see a sprinted start. After consolidating for the first three days, the bulls are back on their feet. The undertone remains broadly positive though some softening shouldn’t surprise anyone. US stock benchmarks have made their highs for the year. The Nikkei in Japan too has hit a new peak for 2009.
Global investors responded to a slew of better than expected earnings and macroeconomic data in late July by pumping fresh money into a broad range of asset classes. EPFR Global-tracked equity funds posted inflows of $9.5bn - the highest weekly tally since mid-June, 2008. The economic picture is brightening up, both in India and abroad. Earnings have exceeded expectations across the globe. Risk appetite seems to be back in flavour. Liquidity was never an issue, though too much of it is definitely not healthy.
The feel good has its flip side too. Crude oil and other commodities are also climbing. Food prices remain elevated despite headline WPI inflation being in the red for seven successive weeks. Monsoon remains a joker in the pack and could fuel inflationary expectations if rain Gods refuse to relent.
The local bulls have to retain their energy for a longer run before leaping to new highs. Companies too have to show meaningful appreciation in the topline to warrant an upgrade. Economic data also has to be persistently good. All in all, we will continue to witness fluctuations in stock prices over the next few weeks and months. It is not going to be a one-way street where only the bulls will dominate. The bears might also get opportunities to stage a come back. A big crash in not expected and markets' direction will hinge on daily dose of news.
