It was on December 11, 2007, that the National Stock Exchange's Nifty closed above the 6,000-mark for the first time. And for the next 23 trading sessions, the market was on a song. The Nifty touched a life-time peak at 6,357; it also registered an all-time high close of 6,206.8 on January 14, 2008.
All of a sudden the sentiment changed from euphoria to glum, triggering one of the great falls in Indian history. Within a span of 10 months, the Nifty slumped to a low of 2,252 on October 27, 2008.
Though the benchmark has witnessed a secular pullback rally, investors have always remained sceptical on market fortunes.
Since then every time the Nifty crosses the 6,000-mark, investors get nervous and anxious. Memory, in this case, seems to be rather long for most of them.
This time is also no different as the Nifty closed for the 98th time above the 6,000-mark. Will it sustain the rally or will the bears once again succeed in chopping Mount 6K?
A majority of market participants do not expect the rally to sustain and advise investors to remain cautious, as the fundamentals, they say, are “in bad shape”.
Currently, the rupee is more vulnerable than ever before. Though the Government is making the right noises, it is unable to contain the weakness of the currency, which is holidaying quite frequently below the 60-level against the US dollar.
This will definitely put a lot of pressure on the current account deficit, as imports will become costly. This situation makes a country a net debtor to the rest of the world.
Overall business sentiment also remains weak and the recovery is unlikely to happen anytime soon, as the interest rate may not come down quickly.
Industrial output in May shocked many by contracting 1.6 per cent against a revised down of 1.9 per cent in April.
Worryingly, a sequential momentum also plunged in May, reinforcing the weak bias for the industrial sector.
Consumer Price Index inflation surprised on the upside, hitting 9.87 per cent in June after easing for the past three months.
Food inflation drove the inflation to 11.7 per cent, with vegetable inflation increasing to 14.6 per cent.
Uncertainty ahead of the 2014 general elections will also impact the sentiment.
But is the situation so grim?
There are some analysts sitting on the other side of the spectrum, too.
According to them, the worst will soon be over for the Indian economy. With more than normal monsoon, the economy should improve going forward, they observe.
Some analysts also feel that FII flow — one of the key worries in recent times following some adverse noises on easy money in the US Federal Reserve — will continue to flow uninterruptedly.
Domestic broking firm Microsec said it believes the markets will remain volatile in July due to weak domestic currency, rising crude oil prices due to unrest in Egypt, and the eventful result season.
“Monsoon is better than normal and this may result in a positive mood of RBI and policy makers. However, we believe RBI may keep rates status quo in its July 30 first quarter policy review. Investors should remain cautious and accumulate stocks with strong fundamentals in a staggered manner,” it added.
One school of thought is also suggesting that markets tend to shine when shrouded by extreme pessimism.
Whichever path the Nifty prefers to pursue, one thing is certain — interesting days are ahead for the market.