Nifty@19,500: Is the market running ahead of fundamentals?
Nifty50 has rallied by about 15 per cent from the March lows to set new record highs.Where are we in this bull phase?This bull phase was born on the pessimism of the Covid outbreak when Nifty crashed to 7,511 in March 2020. For the next eighteen months, we had a one-way rally born on skepticism, which took the Nifty to 18,604 in October 2021. After a consolidation phase lasting more than a year, the bull is charging again.
We are not yet in the stage of euphoria.The rally is global:Even though the recent rally didn’t come as a surprise, the ferocity of the rally took most investors by surprise. Broadly, there are two factors driving this rally: one, global and two, domestic. It is important to understand that the ongoing stock market rally is global.
In the mother market US, the S&P 500 is at 52-week high; Euro Stoxx 50 is at a 52-week high; Germany has tipped into recession, but the DAX is at 52-week high; French CAC is at a 52-week high; the Japanese Nikkei is roaring with 24 percent YTD returns; in South Korea and Taiwan indices are at 52-week highs; in India Nifty and Sensex are at record highs. This is a global rally.The fear was overdone:Markets often overreact, both on the upside and downside. When reality dawns, the excesses will be corrected.
Last year, globally, markets corrected with big downturns in the developed world. In the mother market US, Nasdaq corrected by more than 30 percent. Markets were reacting to the aggressive monetary tightening by the US central bank Fed.
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