Sensex, Nifty set to see new highs in coming weeks, says expert

Chances of Joe Biden taking up the US presidency with the Republicans controlling the Senate is like 'best of both the worlds' scenario for stock markets, says Envision Capital's MD and CEO Nilesh Shah.

Business Desk, ETV Bharat: The Indian stock markets may hit new highs in the coming weeks as the US election outcome along with the festival season will support the bullish sentiment seen recently, according to a market expert.

Nilesh Shah, CEO and Managing Director of investment management firm Envision Capital Services Pvt. Ltd, said that stock markets have started to get a sense that Democratic challenger Joe Biden will be the new US president and have thereby started reacting positively to the development.

“Markets were a little cautious before the polling day, as there was no clarity on the outcome, but after the counting began, we have seen a clear uptrend,” said Shah.

Notably, the Sensex rose in all the five sessions during the past week to settle at 41,893, up by a total of around 2,280 points, or 5.8%. It is now just around 380 points shy from the all-time high of 42,273 points seen in January 2020.

“Stock markets hitting a new high soon is a given now. It just remains to be seen how high we go and how quickly,” Shah said.

Explaining the rationale behind market optimism, Shah said: “Along with the Biden presidency, it is now likely that the Senate would continue to be controlled by Republicans. This is like a ‘best of both the worlds’ scenario for the stock markets… as some Republican control would mean dollar weakness which would be positive for emerging markets like India.”

Also, domestic cues are supporting the overall positive sentiment, according to Shah. “Earnings are better than expected, recovery is better than expected, demand is also coming back in certain sectors. Moreover, interest rates are low and liquidity is strong. So, these factors also provide fundamental support to equity markets,” he said.

Therefore, the short- to medium-term outlook for the Sensex remains bullish, Shah said. However, he added that investors should keep in mind that some correction and consolidation would happen as the markets get fully priced in.

“Also, the correlation of domestic equities with the US markets would likely be very strong in the short term,” he said. “Therefore, till the time US markets are doing good, Indian investors should have little to worry,” he added.

Notably, the US equity benchmark Dow Jones Industrial Average has also spiked nearly 7% in the last one week to settle at 28,323.40 and is still at some distance away from its all-time high of 29,551.42 points logged on 12 February 2020.

Talking about the Bihar elections, Nilesh Shah observed that since the current uptrend in markets is by and large driven by strong FPI flows on account of an expected favourable outlook on Emerging Markets, the results will be a non-event for the stock market.