Keep Global Watch

The index has held steady and only gone higher in 2017.  Corrections haven’t even lasted beyond a day or two. But, at the same time, several traditional index movers have tended to be weak. IT and pharma majors have remained weak and every rally in bellwether stocks in these sectors has been sold down.

The index is being held together mainly by a small basket of favoured stocks. These stocks are already richly valued and are factoring in most of the potential good news. This makes one wonder what new drivers will be coming into play for the indices.

Mergers and acquisitions are a strong factor and could become market drivers. We have little visibility except the clear expression of intent by managements in the IT sector. We should see several M&A deals across IT, pharma, telecom, and banking. These could become the new market drivers.

The market needs fresh levers to move forward. Flogging the existing overvalued index movers in private banks, consumption, and automobiles will only put the indices at greater risk. A more measured onward movement of the indices with wider participation from the ignored parts of the market, is the best bet for a sustained rise in our indices.

For now, we should closely watch the global market which seem to be entering a phase of turbulence. We shouldn’t make the mistake of thinking that India is decoupled. We never really were.

 

“Great investing requires a lot of delayed gratification.”- Charlie Munger.

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