Understanding recent uptrend in the Indian Stock Market
Definition of ‘Uptrend’ – The term Uptrend elucidates on the overall price movement of a financial asset, such as a stock of a particular company, especially when the movement tends to be in an upward direction. Formally speaking, an uptrend can be defined as one in which each successive peak and trough of a share value is higher than the ones typically found earlier in the trend. The ultimate aim of any good technical trader is to successfully pin-point a good uptrend area and to naturally obtain sustained profits from it until the uptrend reverses.
One way to avoid huge losses that can occur as a result of a reversed trend is to sell an asset as soon as one can identify that it has failed to create a new peak or trough. Most technical traders also come up with trendlines to easily find an uptrend and will use this information as an aid to figure out when would be the best time sell a particular stock as it could be a quick and timely warning sign of a trend reversal.
So, without any further ado, let us take a look into the possible factors that are being instrumental in influencing the Indian uptrend in recent times.
- EARNINGS EXPECTATIONS:
While the pundits at Dalal street are of the opinion that earnings will bounce back in the latter half of the year, there is a possibility that the pace at which the rebound takes place could lose its momentum due to the effects of Demonetization and the subsequent implementation of the Goods and Services Tax (GST). In a related statement, UBS claims that while income should be able to recover to some extent in 2017, the bleak growth return hopes in the second half of the year would result in further cuts to the income estimates of Nifty.
- VALUATIONS AND GLOBAL FLOWS:
A few analysts are of the opinion that the Indian market landscape looks promising and would continue to obtain inflows from all quarters courtesy of lucrative valuations. The Indian market is tipped to find itself in a highly favourable position if the same trends continue over a sustained period of time.
- RBI RATE CUT:
Recent developments and policies undertaken by the government indicate at rate cuts which would lay the perfect platform for RBI to slash interest rates as much as 50-75 bps in the coming future and that bank deposits would witness a spike of 4 percent.
- DELAY IN FED RATE HIKES:
Donald Trump’s ascendance to the presidency post has elevated hopes that the US federation would not be looking forward to hiking interest rates in the December review. Instead, a review of the dollar movement accompanied by global turbulence could be the influencing factors before the hike comes into play later in 2017.
- DEMAND AND SUPPLY:
One of the simplest but also one of the most important factors affecting the uptrend in the market, when a large number of people come together to buy stocks, the stock price naturally increases and vice versa thus causing potential uptrends and downtrends.
- IMPACT OF NEWS:
The media too plays a role here which could spark fluctuations causing uptrends to occur. While a company receiving approval from analysts on various news channels would most likely increase its stock value, the opposite could also hold true and would result in a company’s stock dipping.
- POLITICAL SITUATION IN EUROPE AND US:
Another factor that affects uptrends in market is the stability factor. Various events within the country and around the globe affect the status of the stock market. While news like Donald Trump’s election as president caused shares to tumble, implementation of good economic policies especially under the Modi government have taken the stock markets to new heights. Also, at the moment, Europe is reeling under elections. French elections are in progress and in Germany, elections will happen later during 2017. Which means at the moment, Asian markets are better placed than European or American markets. And in Asia, India is better placed compared to China or Japan!!
- FOREIGN DIRECT INVESTMENT:
FDI in recent years has had a huge impact on the share market potentially influencing uptrend behaviour by boosting the value of shares as a result of a number of joint ventures and collaborations.
- INFLATION RATE:
A crucial factor that cannot be overlooked while determining the share values is that of inflation. The fluctuations of inflation rates can be linked to the liquidity conditions in the market. Higher the liquidity, higher the inflation and vice versa. Thus, a higher inflation rate could trigger a greater chance of uptrends in the markets.
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