Seems to be like a bit of a conundrum right now. There are arguments which can be made on both sides. While DIIs are flush with cash (about 1.2 Lakh crores) and can expect 20k-25k crores inflows every month, there is no reason to believe that a major crash is imminent. Also, while FIIs have been net sellers for the most part of recent times, DIIs with their higher cash inflows have been pulling the markets up. If I am not wrong, DIIs and FIIs hold almost the same stake in the our domestic equity markets now so the balance is not what it used to be earlier where FIIs had more sway. Secondly, if all the chatter of a soft landing in the US combined with a September rate cut is to be taken at face value, there is further reason to believe in the overall bullish thesis in the global markets. On the flip side though, multiple sectors do seem to be in the overbought territory (defense, railways, water, data center pack, most PSU banks etc.) and a very healthy correction (atleast time correction if not price) cannot be ruled out. If the broader earnings drop, this correction can be aggravated. Having said that, I personally believe that NO ONE knows what will happen, not even the best investors/traders in the world. Everyone reads the market developments and builds their own these. So for what its worth, here’s my thesis. Given that some sectors seem to be showing green shoots of recovery like chemicals (agro chem), pharma, textiles, as results improve, we could see a decent rally in these sectors, while some overheated sectors might cool a bit. Add to this, if FIIs come back to our market in a big way, another rally is very much possible. So in a nut shell, as per me, there might be an interim correction but the overall bullish sentiment in Indian markets might prevail
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