Is it a bull rally or a dead cat bounce case for the Indian stock markets?

Is this the bull run all investors are waiting for, or is it a temporary high?

Bull Run in The Indian stock markets

Indian equities continued their bull run on Tuesday, cueing other Asian shares. It reflects a Wall Street rebound as investors downplayed increasing oil price impacts. However, a bearish risk remains as US Federal Reserve is aggressively hiking its rates. We witnessed the BSE Sensex increase by 440 points, and Nifty opened higher, adding over 2% on Tuesday. The Indian stock market was closed on account of Dussehra on Wednesday. There was an advance in the US futures, and the Asia-Pacific shares' MSCI Index outside Japan rose by around 0.4%. The index declined 13% in September and is up 4% this week. The dollar took a hit as it saw the biggest slump in the week on Wednesday. 

Also Read: Is it a new bull run?

Rate Hikes and Strong Sales

There is little hope of the central banks stopping the aggressive interest rate hikes. Oil producers in Saudi Arabia accepted production cuts of considerable amounts on Wednesday. It led to a three-week high for Brent crude futures at $93.99/barrel. The international markets also witnessed rallies upward as Sensex rose by 1,276 points on Tuesday. Monday saw the market fall by 638 points, leaving investors wondering if the upside is just a dead cat bounce case. Manufacturers of passenger vehicles and banks performed well and showed strong September results. Head of Research at LKP Securities, S Ranganathan, said Dalal Street is positive about demand in retail across all segments. The rally is not just because of the global cues that seem positive, but it is also because of positive quarterly results. 

The top gainer was Nifty Private Bank on Tuesday, rising by over 3%. The increase in interest rates might also encourage higher NIMs (net interest margins) which might attract more deposits. The rally internationally happened due to a slowdown in US Manufacturing PMI. There are hopes for the US Fed to slow down with the tightening of its policies, which led to the falling of US bond yields, just like the dollar. Axis Securities PMS, Portfolio Manager Nishit Master, says the Nifty50 and Bank Nifty rally can sustain if the US Fed stops its liquidity tightening. He believes investors should purchase companies that are high quality and have reasonable valuations. 

Also Read: Avoid these mistakes while investing in a bullish market.

Where to go and what to do?

ICICIDirect data shows 16/22 times purchasing on dips in September and October yielded positive returns in this calendar year's Q4. Australia's Reserve Bank increased rates by 25 points earlier in the week and led to a belief that the economy and labor market were weakening. It has fueled speculations that there might be more interest rate hikes by the central banks worldwide which would increase risks.

Dharmesh Shah, a research analyst at ICICIDirect, said he expects anxiety in investors because the global volatility will vanish in the upcoming weeks and will lead to a high of 18,100 in September 2022. He added that the index corrected by only 38.2% in the rally in the past two months, facing global volatility. It signifies its strength and outperformance against its peers globally. Axis Securities believes the medium to long-term outlook is positive, and there could be temporary volatility. 

Indian equities continued their bull run on Tuesday, cueing other Asian shares. It reflects a Wall Street rebound as investors downplayed increasing oil price impacts. However, a bearish risk remains as US Federal Reserve is aggressively hiking its rates. We witnessed the BSE Sensex increase by 440 points, and Nifty opened higher, adding over 2% on Tuesday. The Indian stock market was closed on account of Dussehra on Wednesday. There was an advance in the US futures, and the Asia-Pacific shares' MSCI Index outside Japan rose by around 0.4%. The index declined 13% in September and is up 4% this week. The dollar took a hit as it saw the biggest slump in the week on Wednesday. 

Also Read: Is it a new bull run?

Rate Hikes and Strong Sales

There is little hope of the central banks stopping the aggressive interest rate hikes. Oil producers in Saudi Arabia accepted production cuts of considerable amounts on Wednesday. It led to a three-week high for Brent crude futures at $93.99/barrel. The international markets also witnessed rallies upward as Sensex rose by 1,276 points on Tuesday. Monday saw the market fall by 638 points, leaving investors wondering if the upside is just a dead cat bounce case. Manufacturers of passenger vehicles and banks performed well and showed strong September results. Head of Research at LKP Securities, S Ranganathan, said Dalal Street is positive about demand in retail across all segments. The rally is not just because of the global cues that seem positive, but it is also because of positive quarterly results. 

The top gainer was Nifty Private Bank on Tuesday, rising by over 3%. The increase in interest rates might also encourage higher NIMs (net interest margins) which might attract more deposits. The rally internationally happened due to a slowdown in US Manufacturing PMI. There are hopes for the US Fed to slow down with the tightening of its policies, which led to the falling of US bond yields, just like the dollar. Axis Securities PMS, Portfolio Manager Nishit Master, says the Nifty50 and Bank Nifty rally can sustain if the US Fed stops its liquidity tightening. He believes investors should purchase companies that are high quality and have reasonable valuations. 

Also Read: Avoid these mistakes while investing in a bullish market.

Where to go and what to do?

ICICIDirect data shows 16/22 times purchasing on dips in September and October yielded positive returns in this calendar year's Q4. Australia's Reserve Bank increased rates by 25 points earlier in the week and led to a belief that the economy and labor market were weakening. It has fueled speculations that there might be more interest rate hikes by the central banks worldwide which would increase risks.

Dharmesh Shah, a research analyst at ICICIDirect, said he expects anxiety in investors because the global volatility will vanish in the upcoming weeks and will lead to a high of 18,100 in September 2022. He added that the index corrected by only 38.2% in the rally in the past two months, facing global volatility. It signifies its strength and outperformance against its peers globally. Axis Securities believes the medium to long-term outlook is positive, and there could be temporary volatility. 

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