Wish you all a Very Happy Diwali

What a year it has been and is a perfect climax where we ended with Sensex reaching at all time high and people are talking about Nifty reaching 6400 and higher shortly. We were at  5600 level last Diwali and we made a low of  5100 two months back and we are now at all time high. What has led market is FII's money which is coming in ton's and may continue to do for some more time.

India on macro and micro level has passed through tough times with increase in CAD because of higher Oil, Gold imports and worst of all currency depreciation to alarming levels. Fortunately because of measures of Govt on Gold Imports and settling of rupee we are expecting better than expected CAD which is a great news.

As we have elections next year we which is key and with cues coming from surveys hinting BJP coming to power and also we have state elections in some states in North which could give a indication on political scenario could help the market to go to levels of 6700 and above levels in medium term. With indication of economy bottoming we are expected to see bouncing in economy partly supported by good monsoon which could see rural spending increasing and also because of measures by RBI if inflation was tamed things are looking rosy.

On the darker side what we have seen is this rally is driven only by FII's money and with DII's not participating as we have negligible retail participation and if see US withdrawing stimulus which could happen in next 6 months, market can react violently if  FIIs pullback, and things did not improve domestically we may see market going down very fast.

Let us hope for better and look for sectors and stocks that could do well. Banking and Auto sector with rural focus could be the sectors to watch out for next year as these sectors are the ones which are going to be benefited if we see improvement in economy, IT and Pharma though we have seen rich valuations they should continue to do well with improvement of global economies. Reality and Infra is avoid till we see clear signs as these companies are extremely leveraged with debt and may not do well in next one year except some companies which has better governance and assets.

Keep posted for some stocks  Ideas for next year