There are two factors - one positive and the other negative- that are impacting the market trend now. The positive factor is the favourable global cues. The mother market US has shrugged off the Fed’s ‘hawkish pause’ and has moved forward. S&P 500 up by 7.7% during the last one month is a reflection of a resilient market. The negative factor is the weakness of Bank Nifty, which is preventing the Nifty from moving to a new record high. It is important to understand the fact that the weakness in Bank Nifty is primarily due to mutual fund selling in HDFC Bank to avoid the 10% ceiling in HDFC Bank after the merger of HDFC Ltd in HDFC Bank due in July. The weakness is due to technical and not fundamental issues. The weakness in HDFC Bank is a buying opportunity for investors with a medium term time horizon.
Another significant factor is that there are signals of Indian manufacturing showing clear revival. This is the beginning of a cycle that can last 4 to 5 years. Capital goods will be major beneficiaries of this capex cycle.
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