Foreign investors bought stocks worth $23 billion in 2020, and at least 4.9 million demat accounts were opened in the fiscal year, up 22.5% from the previous fiscal year. Better-than-expected results in the September quarter helped improve the market sentiments as well. “Going forward, our focus will be on two factors, inflation and corporate earnings, to ascertain the market direction," said Shah. “If the earnings momentum sustains, any correction will be temporary, but if it doesn’t, then any rally will be temporary."
Inflation can also play spoilsport in the current rally, he said. “Surge in inflation could lead to central banks around the globe cutting liquidity, which can impact asset prices including equities," said Shah.
On concerns over rising valuations of the stock market, he said the valuations are slightly on the higher side, but it is not a bubble. But, he did advise investors to follow a balanced approach. “Investors should not leverage in this market and must not be overweight on equities at this point."