Morning view on the market by Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

The ongoing rally in global stock markets is primarily driven by the surprising and unexpected strength of the U.S. economy ( 2% GDP growth in Q1 23), in spite of the savage 500bp rate hike by the Fed. Global markets which had discounted a US recession by mid-2023 have been proved wrong and the markets are now compensating for the excessive pessimistic discounting in 2022.

An important point of distinction between the rally in the US and in India is that the US rally is primarily led by 8 tech stocks while the Indian rally is more broad-based. Sustained FPI flows (Rs 47148 crores in June) are the main driver of the rally in India. The recent surge in FPI inflows has been triggered by the recent ‘Sell China, Buy India’ strategy of the FPIs which, in turn, is being influenced hugely by the anti-China attitude/policy evolving in the US and the developed world.

Since the strength of the market momentum is high, the rally can continue; but valuations are getting stretched.