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Here comes the money

For the first time in the history of Indian markets, trade was halted twice as the SENSEX and the NIFTY breached the upper circuit. Remarkably, the market was open for a mere 22 seconds before it was frozen for the day and what was more remarkable was the fact that the indices rose by over 15% in those 22 seconds of trade which meant the SENSEX crossed the 14000 mark with a rise of over 2000 points and NIFTY crossed the 4000 mark. How and why did all this happen all of a sudden? Where was all this money before? Thats exactly what I wish to write about today. So read on!

Saturday was the day the results of the Lok Sabha polls were announced and Monday being the first trading day after the announcement of the election results the positives from the election were factored into the markets right at the opening bell. The election results saw the Congress led UPA gain the majority by a long way compared to their closest rivals in the BJP led NDA. The result was that the Congress and its allies would be forming the government by themselves for the first time in nearly 2 decades. Moreover, this means that the existing government will continue for at least another term and by the looks of the popularity that one Rahul Gandhi has gained it could well be more. This made the Indian economy an attractive destination for the foreign investors and the big players in the domestic scene who undoubtedly would have been following the outcome of the elections rather keenly. When the results were out all the investors who had the cash but were playing it safe were ready to plunge into the equity market again and thats exactly what lead to the sudden surge in the broader market indices.

Today, markets closed flat after an extremely volatile session of trade and this could mean that the markets might stabilize at current levels and the new benchmark for the SENSEX can be set at 14000 for the current calender year. It will be very interesting to see how the markets pan out over the next couple of weeks and whether the bullish rally will sustain or the bears will be back in action. This upsurge has put a lot of pressure on the policy makers and the disappointment will also be of an equal magnitude should there be any. So my advice for investors would be to play it safe for now and watch how the markets unfold over the next couple of weeks and to book profits as and when you feel right during this period of time and to take a decision regarding your port folio at a later date once the markets stabilize around a certain level.

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