Current bull run in market will be bigger than the previous one: Analysts

NEW DELHI: The Indian markets have rallied nearly 28 per cent so far in the year 2014, outpacing other regional as well developed markets. Despite the recent run-up, analysts feel that the rally is here to stay, which can take the Sensex to around 40-50k levels by 2016-end.

India is firmly in a multi-year structural bull market, say analysts, adding that we are in the second stage of the bull run. As per a Dow theory, there are three phases of a bull market.

The first stage of a bull market is referred to as the accumulation phase, which is the start of the upward trend. The second phase starts when informed investors enter the market and this is known as ‘Public Participation Phase’.

The last stage in the upward trend, the excess phase, in which smart money starts to scale back its positions. The important thing to note in this phase is the fact that the momentum is not that strong and early signs of primary downtrend become visible.

“The last bull market started back in 2003 April and Sensex rallied from a low of 2904 to 21206, returning almost 680 per cent,” said A K Prabhakar, Independent Market Expert.

“This bull market started in August 2013 from levels around 17,448 and my target is 45,000-50,000 levels by 2016-end,” he added.

Bull markets start during a phase of huge pessimism which is generally the end of the bear markets or early recovery phase and then the further growth of the market is followed with skepticism. Then bull markets mature on optimism and then die after an elongated euphoria.

“There are three phases of a bull market and three phases of a bear market. By my reckoning, we are at the second phase of the bull market,” said Ramesh Damani, Member, BSE.

“Each bull market is bigger than the preceding bull market. It creates more wealth. It creates more opportunities. I am more excited,” he added.

However, analysts are of the view that we are still not in the hyper confidence mode and still the rally is being looked through skepticism, if not by many.

Why would this market be any different from the previous bull markets that we have seen in the past? Well, analysts see this bull market to be long-lasting and much more matured than the other bull markets because it is backed by recovery in fundamentals and a stable government.

“This bull run, which comes in phases, would be less based on euphoria and more to the future earnings and fundamentals attached to it during this time,” said Siddharth Sedani, Vice President (Portfolio Management Service) at Microsec Capital Ltd.

“Previous bull runs like 2004-08, 1995-99 and 1990-92 lacked majority government at the center, which is unlike this time. The potential of full majority government would be realized by this bull run. So, it would have depth and strength to sustain as being a multi-year bull run,” he added.

How should investors play this market?

Everything seems to be working great for the Indian markets which have rallied over 27 per cent so far in the year 2014, beating other emerging market peers.

But, as history suggests, nothing moves in a straight line and Indian markets might also see some corrections in future.

Analysts still advise investors to tread with caution because we are trading at record highs and it is perfectly normal to witness periodic corrections or profit booking. Investors should use these opportunities to enter markets or accumulate quality stocks at lower levels.

Damani is of the view that it (a bull market) is a life altering event and it is still not too late to get into the bull market just because it has gone up from 17,000 to 26,000.

The participation of retail investors in the Indian equity market is yet to happen and the rally would continue in the long run due to fundamentally sound steps taken by the new government and improving global outlook.

“I believe that this is the time to accumulate the stocks of those companies which have either started reporting better set of earnings or have the potential to take maximum advantage out of the economic revival,” said Tushar Pendharkar, Equity Strategist, Right Horizons Financial Services.

Vivek Gupta - Director Research, CapitalVia Global Research Ltd is of the view that investors should be stock specific and look to invest in the sectors where money has still not flown in. Capital goods and steel sectors are the sectors to be looked upon in the coming year.

“Also, financial sectors, especially the stocks of brokerage houses, can be a good place to invest in or be in the coming years because these are the stocks which generally show the real momentum in the last stage of the bull markets," he added.