The markets have run up too fast in July. Investors are wondering if this run-up is sustainable. That’s a question for which there are no easy answers. Markets can run up very quickly on the back of liquidity. When liquidity increases rapidly, the run-up can gain more velocity than we can anticipate. Will we see such velocity this time?

It is too early to say but one thing is certain, India is one of the few countries offering high growth. Our battle against inflation is progressing to plan. Our Government has all the responses in place. Interest rates are being increased and liquidity is being tightened. The rupee has also recovered from its all-time lows. Commodities prices are softening, and oil looks set to soften further. Under these circumstances, the markets can take positive reinforcements from macro-economic factors.

Investors must keep a close watch on how foreign flows pan out in August since they have been favourable in recent days. At the end of the result season, we could see some slack coming into the markets. Investors must use every opportunity to buy into the attractive parts of the market and build a robust portfolio that will benefit from India’s economic growth. Waiting and delaying decision-making could lead to investors missing out on attractive opportunities. That is not an approach to take right now.

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