Despite the benchmark indices being at a record high and being considered “overheated”, the bullish momentum is likely to continue. Cues from global markets are also positive with Japan markets leading from the front. Economic activity has picked up as India is slowly opening up businesses braving the Covid pandemic.

With foreign portfolio investors turning buyers in the last few days, benchmark indices are likely to gain further momentum, analysts said.

Liquidity in the domestic market has been strong for the past couple of days with FIIs putting in over ₹6,000 crore in last 4 sessions itself. Further, strong service PMI data and healthy GST collection numbers boosted market sentiments. India’s Service PMI stood at 56.7 in August, up from 45.4 in July indicating the fastest growth in over 18 months while the GST collection remained above ₹1 lakh mark for the second consecutive month at ₹1.12 lakh crore for August.

Shift towards quality stocks

According to analysts, as market is at peak levels, investors are now shifting towards quality stocks where the earnings visibility and the balance sheet strength are high.

SGX Nifty futures are currently hovering around 17,401 (at 8 am), as against Nifty futures’ Friday close of 17,329.35 points and the Nifty spot close of 17,323.60. While Japan’s Nikkei jumped almost 2 per cent, others in the region such as Korea, Taiwan and Australia have gained between 0.2 per cent and 0.6 per cent in early morning trade on Monday. US markets on Friday ended on a mixed note and will be closed on Monday

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, said, “Strong liquidity and positive global cues are lively to support domestic markets to continue their movements to record levels. However, valuations are also moving beyond comfort zones and hence could lead to bouts of profit-booking and increase in volatility. Large caps offer better margin of safety in the current environment and could continue to remain in focus in the near term as well.”

Santosh Meena, Head of Research, Swastika Investmart, said, “Movement in USD-INR and FIIs’ behavior will be important to watch out for as FII flow is playing an important role in the current pace of the market.”