Is this a Bubble?

In the last month the stock indices has gained almost 7% and it is hardly 4-5 trading session for this month and the indices has gained almost 3% from the March closing. Traders who were holding short positions in anticipation of a step correction post budget rally were caught incognizent and might have suffered huge losses. Traders have started winding there positions of put’s of 5100 and 5200 and the call for the upper benchmarks are showing lot of participation.

My worry over here is that the indexes have not corrected substantially since the budget was announced and with each passing day the indexes are breaching the so called resistance levels. I feel a bubble getting formed here and worried for the day when it will burst because the day it will burst small investors will not find exit anticipating that the indexes will make up the losses and accelerate again which actually will not. Yesterday indexes kissed the crucial marks but somehow they were not able to sustain the level and profit booking pulled them down marginally.

Logically With rupee appreciating the FII money should get pulled out from the market which is not happening. The current rally is contributed by the heavy FII participation along with the domestic investors. Analysts believe that condition in Europe and US is still not stable because of which lot of money getting pumped in the developing economies like India.

With market touching new highs common investors feel happy and want to ride the rally but things go worse when there is sudden offload by the FII. I think that the entry and exit route of FII should be checked so that the common investor’s interest in the stock market is preserved.