The Euphoria of a stable government, GDP growth of 6.8 %, Businesss confidence at 64 points is driving the Indian stock markets to new highs. The FII's have brought $ 2.5B in May 2009. Can we sustain this race to a new high as majority are betting on ? I doubt it. This rally is driven by, Very high level of liquidity, this liqudity is created by the huge stimulus package announced by all major governements across the world, The currency printing press has been working over time, Money cannot be kept in Vaults and will chace assets,The valuations in India have hit 18 times trailing earning, the highest in the world. India will continue to grow much faster than the rest of the world but the macro fundementals of major global economies like US, EU & Japan is weak. We live in a involved world, so when these economy really sneeze, the merging markets too will catch cold.
In India, this week we have a the Parliament session from June 1st, the 100 day plan to be released on 4th June. The May production nos. of Auto's, Cement, steel etc coming out. The smart people have already discounted the same and are in a distribution mode. We may see a 10 - 12 % correction post the 3rd - 5th June leading to 19th June, when the Advance Tax nos. will be out officially.
So be ready to play the week to a Nifty 4425 - 4650 levels.