The fundamentals stink - PE is high...blah blah blah. This is not fundamental talk. This is bearish talk. The only talk that matters - what market is thinking which can be gauged only through the action of market participants. Always remember - Market is not in the business of pricing current fundamentals but it discounts the expected future
First Thing First: For any fundamental thinking to prevail - the fear needs to recede. That only happens - when too much volatility subsides. Nifty did that by taking support at 200-week moving average. Ok...this is technical. In layman terms - market found a floor where fear got arrested.
Then came the Budget, which I believe will go down in history as one of the best if Govt follows through on the execution.
2016 Budget is a great Budget and can be turning point if Govt can execute
— Deepak Singh (@smarket) March 11, 2016
Unfortunately, media analysis to begin with was very shallow but market is always smart to pick up right things.
The Budget did put a floor to the PSU Bank stocks. SBI stock which was down and out in Feb 2016 - made a stunning comeback in March 2016.
Now it's pouring good news for PSU Banks. With Govt sticking to fiscal deficit target - bond yields have come down - it means higher bond prices - good news for PSU Banks as they hold these bonds. Also, there is high expectation of big rate cut and also news of PSU Bank consolidation creating excitement.
That's not all - Incentive for REIT (Real Estate Investment trust) in the budget has generated fresh interest for beaten-down real estate stock. This is the chart of DLF
The point I am trying to make - the up move in the market is logical and fundamental. This is the way market is thinking right now which can eventually turn out to be not true, but that's ok. No one knows the future. All we can do - is make educated guess about the future and that's the fundamental of the market.
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers