Below are Views On The liquidity expansion by the central bank and the ample FII driven liquidity By Dr. Joseph Thomas, Head of Research - Emkay Wealth Management

“The liquidity expansion by the central bank and the ample FII driven liquidity, a V shaped recovery of growth aided by the discovery of vaccine, and most recently the change of guard in US have been some of the factors propelling markets higher and higher. As the sensex crosses the 50k, the valuations do look stretched. The valuations are a function of earnings and earnings not coming through remains the key risk at the current juncture. The continuous up move not backed by fundamentals may make the rally fragile going ahead.

The positive thing about the ongoing rally is that it has been fairly broad based; across market caps and sectors. As the panic and crash was pandemic infused, the pullback was led by Pharma and since then Banks, IT, Auto etc. have also gradually moved up. A broad based rally should be underpinned by a healthy economic growth and that would be the key variable providing indications how the future trajectory of risk assets shapes-up”

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