Markets are all set to scale higher

The existing bull market is cooling off with what seems so far to be a healthy correction to the steep rise over the first two months of the current year. Further weakness is likely to persist after the adverse results to the ruling UPA coalition in the state elections. The Credit Policy announcements and the Union Budget are now keenly awaited to determine the direction of the market in the near future. Given the quantum of money that has flown into the markets, chances of a break on the upside are more. More than a disappointing budget and credit policy it will need a significant deterioration in the global liquidity position and market sentiment to mar the near term prospects of our bourses. We stay with the view that markets are all set to scale higher and possibly test their all time highs over the next couple of months. Hence the current pull back is a good opportunity for investors who have missed the rally so far to hatch on to the bull bandwagon. 

The beaten down sectors like banking, infrastructure, capital goods and metals are the best picks for buying and trading on the long side. Effort should be made to stick to large cap and well established stocks. 

Finally this seems to be a liquidity driven bull market which is likely to last only for a couple of months. Fundamentals have still not improved in any major way. Until we see signs of the ground reality changing it is best to treat this upsurge as a temporary bull run. Investments made now should be gradually booked on the way up  

 Given the twin challenges of major global financial problems and the slowing down of domestic economic growth, it would be fair to assume that good opportunities for long term buying will emerge once again after this bull run driven by the liquidity splurge gets over.