The nifty's 20 per cent rally, from 4,000 to 4,800 has been marked with widespread scepticism. At every higher level, analysts have spoken about an impending sell off, booking profits and going short. Maybe that's only added fuel to the upmove.
After Wednesday's phenomenal surge though, the first signs of hysteria seem to be coming to the fore. There is still scepticism; in fact many believe that the upside from here is capped. And while there is no mass participation or stock mania yet, some of the action in the non-Nifty space is a bit alarming.
It is selective though. The advance decline ratio is not 7:1 or 8:1 as you find in advanced stages of euphoria, rather it's been more like 1:1. Yet individual out-performers are surging to new highs. RNRL's breathtaking move yesterday is a good case in point. Earlier this week, sugar stocks rallied 25 per cent odd in a single session. On Thursday, large-cap real estate stocks shot up 10-12 per cent apiece and yesterday stocks like RPL zoomed 12 per cent. These explosive moves reflect the excesses of a post break out phase. What stocks do in six months, they are doing in a single session. There is no mass hysteria yet, but blowouts are visible in select pockets. The pendulum may be swinging from ultra caution to over optimism. Part of the reason is liquidity, of course.
The FII tap has opened again. Since Wednesday, the dollars have been gushing in. This is showing up in large caps like RIL, Bharti, Reliance Energy, DLF. The local crowd is getting into the act as well. Many of the sharp moves are accompanied by astounding additions to futures open positions. Speculative activity is revving up. Some of the unnaturally sharp spikes could present good profit-booking opportunities.
The trajectory of the market is up, the screen is clearly telling you that. Yet it's getting so heady out there that a jerk down or two may follow, just to shake off a few of the punters.
(The writer is Executive Editor, CNBC-TV 18)