DNA Money Edit: March of stocks in pre-poll rally

There is an unexpected march of stock indices amid expectations of a decisive verdict in the general elections in May. Extending their winning streak for the sixth consecutive session, both BSE Sensex and NSE Nifty on Monday regained new highs as investor sentiment remained upbeat on sustained foreign fund inflows and narrowing trade deficit. 

The 30-share benchmark Sensex, which hit an intra-day high of 38,369 on Monday, closed above 38000-levels. Some investors were quick to lock in gains, but many others are waiting for the pre-poll rally to take them to a higher profit levels. 

The fact is that Sensex has already risen over 2000 points in March, taking some stock valuations to dizzying heights.

What is helping Indian stocks and rupee is the narrowing trade deficit. The marginal 2.44% increase in exports as well as lower imports of gold and petroleum products have significantly narrowed the country’s trade deficit to $9.6 billion. The rupee has risen to its highest in more than seven months. A potential revival in earnings, low interest rates, improvement in banks’ asset quality and recovery in corporate India’s capex are all helping the markets surge ahead. But retail investors need to be extremely cautious about a potential fall if sentiments go awry.