Fed impact: Analysts advice investors to remain cautious

Manisha Jha Mumbai | Updated on September 16, 2019

But some believe the worst is over for Indian markets

The markets cheered the US Fed stand of maintaining status quo in its monthly bond-buying programme. So, does this mean the worst is over for Dalal Street and the benchmark indices are headed for their all-time highs?

According to several market experts, it is best to remain cautious and sensible given the wild swings witnessed by the market last month. Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities, believes the present rally was driven mostly by short-covering and given that most of it was over and the swings were so wide, it would be best to tread with caution.

Analysts also believe that since Thursday’s rally was sharp and sudden on the back of the Fed’s positive surprise, only very few investors were able to take advantage of it. “Investors in small- and mid-caps are still stuck with stocks trading below their 52-weeks lows. Investors with positions in Nifty and large-caps mostly made money,” added Thunuguntla.

According to Saurabh Mukherjea, CEO – Institutional Equities, Ambit Capital, investors should not get carried away with the wild swings, ranging from pessimism last month to optimism now. “Despite the rally today, there is a good chance that the RBI could tighten liquidity and Government spending is likely to get throttled as it struggles to meet its 4.8 per cent fiscal deficit target... so with neither monetary nor fiscal policy in a position to support growth in the next six months and with tapering of the US QE3 being a matter of ‘when’ and not ‘if’, investors should remain cautiously optimistic and invest in clean, well-run, small- and mid-caps and cyclical stocks excluding banking as we continue to see banking as a structurally challenged sector.”

But Alex Mathews, Head – Research, Geojit BNP Paribas, believes “the worst is over” for the markets. He said: “We could see the benchmark indices hitting an all-time high in the short-term. We can expect sharp rallies across the globe, including India as a result of the Fed decision. Both the Sensex and the Nifty have crossed the 200-day moving average and all technical indicators are showing a further uptrend.”

Motilal Oswal, CMD, Motilal Oswal Financial Services, said: “All positive factors seem to be coming together for the markets, such as the US Fed decision and expectations of a reversal of liquidity lightening measures from the RBI policy on Friday which should provide relief to rate sensitive sectors. I expect Nifty to go up to 6,180 level and a Sensex target of 21,000 in the short term. After being in the oversold region, markets are finally optimistic of scripting a comeback. This rally would eventually trickle down from large-caps to small- and mid-caps as well.”


Published on September 19, 2013

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