In early February this year, bears were firmly holding the fort with a pal of gloom setting over the Dalal Street. Indian equities mostly resembled the trend their global stock market counterparts followed, as renewed worries of global economic slowdown, US Fed resorting to its first rate hike in several years in December and persisting weak commodity prices prompted investors to park their funds in safe havens such as US treasury markets.
Back home, investors, mainly overseas players, were cautiously optimistic with an eye on the Union Budget, which had promised a lot of reform-oriented measures from the government.
As it turned out to be, equity markets cheered the Budget announcement, setting the tone of a broad-based market rally thereafter. Foreign portfolio investors, in particular, hailed the government's decision of not deviating from the fiscal consolidation path in order to push growth.
The rally showed no signs of abating since then, although the markets reversed the positive trend for a while in late June when the UK voted to opt out of the European Union. But Indian markets showed lot of resilience and soon bounced back as the strong spell of monsoon covering most part of the country fuelled optimism among the investors after facing two back-to-back deficient monsoon years.
As things stand today, the Sensex has vaulted a whopping 26.55 percent or 6,093.45 points from a low of 22,951.83 touched on 11 February to breach the psychologically important 29,000-mark and close at 29,045.28 on Thursday.
So, the big question will the rally continue going ahead or a correction is round the corner?
Most of the stock market analysts rule out any possibility of a major correction in the market. FIIs will continue to pump in funds in the Indian stock markets, says G Chokkalingam, Founder & Managing Director with Equinomics Research & Advisory.
Chokkalingam expects the index to touch a new life-time high by this December as good monsoon, passage of GST Bill and hopes of rate cuts amid moderating food prices will give FIIs reasons to remain bullish on Indian equities.
Also, the Sensex is just 2.1 percent short of breaching its all-time closing high of 29,681.77, and intra-day high of 30,024.74 touched in March last year.
He cites India and the US as the two major economies, which are not showing signs of any deflationary trend, and this would encourage the FIIs to stay invested in these countries.
Having pumped in Rs 56.410 crore or $8.4 billion in Indian stock markets over last the six months, FIIs are most likely to play around Indian markets, said Chokkalingam.
"Where will the FIIs go...China has a problem, Euro is struggling to grow at even 1 percent, Japan is fighting inflation and with Brexit concerns still around, these investors will continue to find Indian markets attractive," said Chokkalingam.
AK Prabhakar, Head of Research, IDBI Capital also feels the probability of Indian markets scaling a new life-time high and maintaining a steady upward momentum going ahead will persist.
"The way rally is panning out, it is systamatic, and the market will not correct for any filthy reasons," said Prabhakar.
Despite the stupendous rally over the last six months, Prabhakar cautions investors to maintain stock-specific approach. With the US headed for a general election later this year and Brexit worries still weighing, companies in the pharma and IT sectors may continue to underperform the markets, said Prabhakar.
The next big rally in the Sensex will come from upturn in ITC, Coal India, L&T, Infosys which were mostly laggards during the recent upsurge, says Chokkalingam.
With the prospects of good monsoon reigning in food prices and keep inflation levels steady over the next few months, the RBI may cut interest rates by another 25-50 basis points by this fiscal end to push growth, feels Chokkalingam.
Also, the accelerating public spending by the government and bank credit nearing 10 percent growth, private investments by Indian Inc could pick up in the next 2-3 quarters, said Chokkalingam.