It is Diwali time at the stock market as Sensex is on the rise. With more than 1300 points higher than the September closing, October may turn out to be the best month of 2015. its previous best month was may when the Sensex posted gains of 800 points. What is heartening is that FIIs have started coming back to Indian equity. On the other hand DIIs have remained net sellers, albeit marginally. Some factors that helped India attract money are that the fed is likely to postpone its rate hike in 2015 and ECB president Mario Draghi indicating that a monetary easing policy would be announced in December. That means the market would be flush with liquidity. As and when there is liquidity, emerging markets see inflows of funds from FIIs, pushing stock indices high. But apart from the fed and ECB, RBI governor Raghuram Rajan has also helped the Indian market to go up as his 50 basis point cut in the repo rate at the fag end of September improved sentiment.
Historically we have seen that the Indian market normally surges during Diwali and this year has been no different. Based on historical data, the best time to buy Indian equity is the beginning of October. And the best time to exit is February. Normally the market takes a beating post budget – perhaps due to the hype the budget creates, resulting in a pre-budget rally. We need to wait for this to happen this time but right now the market is in a good mood and should sustain at least till Diwali. With no major disappointments in the September quarterly results, the market has sustained its gains.
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October 26 2015