The benchmark Indian indices, the Sensex and Nifty, increased slightly on Friday, following encouraging signals from international markets. Real estate, pharmaceutical, and metals indices led the way sectorally. Markets with even greater scope saw robust purchasing activity.
Market Perspective
The indication from the market is that the significant correction on Wednesday was a one-day occurrence rather than a reversal of the upward trend. The fact that this has happened repeatedly during the current rally validates the efficacy of the buy on dips strategy. Because the US 10-year bond yield is currently hovering around 3.9% and the dollar index is below 102, the global cues are still favourable.
The overvalued mid- and small-cap segments are currently causing market concern. This rally, which has entered a frothy zone, is being driven by retail exuberance and persistent flows into mid- and small-cap mutual funds. The current surge in the market as a whole is not sustainable. Returns are not as important as safety. Safety is definitely in big caps these days. Large caps are expected to perform better in the future than mid- and small-sized caps.