Strong FPI flows and buoyant retail sentiment to keep bulls snorting

Indices across Indian equity markets have edged towards new record highs before undergoing a small correction in the past few sessions. The National Stock Exchange Nifty has gained 20 per cent in the past year; mid-caps (up 33 per cent), small-caps (up 31 per cent), and micro-caps (up 44 per cent) have done better.

Several factors have precipitated this rally.

A pause in interest-rate hikes by the Reserve Bank of India (RBI) has brought relief. There are signs of economic recovery continuing; although profit-after-tax growth rates have mellowed out, revenue growth continues to look strong. Most corporate guidance is optimistic. Inflation has moderated somewhat, mainly due to crude oil and gas prices tapering off in the past five to six months. The