Sensex @ 60K, In Top Gear; Experts Recommend Caution At Higher Levels

The Sensex closed on Friday at 60,048.47, a gain of 163.11 points, up 0.27 per cent while Nifty ended 30.25 points higher at 17,853.20, up 0.17 per cent.

The Sensex journey to 60K has been the swiftest from its half level at 30K as it took only 21 months to reach last 30,000 points, while it took 29 years from its inception in 1986 to reach the first 30,000 points. The time taken for the last 10,000 points, from its journey from 50,000 to 60,000, was much less, only 246 sessions against the previous 10,000 points, from 40,000 points to 50,000 points, taking 609 sessions. Also, the time taken for Sensex to gain the last 5,000 points was just 42 sessions (against 204 sessions for the previous 5,000 points).

According to experts, market levels are just incidental. All-time highs (ATH) don’t mean much because, every ATH is preceded by a series of ATHs and it will be succeeded by many more to come, they added.

Aashish Somaiyaa, CEO, White Oak Capital said, “We continue to ask our clients to remain fully invested, irrespective of the levels, as timing the market is a futile exercise. 2010 to 2020 saw series of false starts in the markets coupled with multiple economic disruptions which has made 2021 hard to believe for most stock market participants”.

He further said, if supportive macro conditions persist globally and India continues to stand out on relative merit in light of our government’s reform approach, one can believe this market has legs. “The surge of FPI inflows (US$ 38bn) into India since April 2020 suggests that foreign investors continue to place confidence in India’s diverse corporate universe with its alpha opportunities”, Somaiyaa opined.

Attributing the smart performance of the Sensex to resumed activities of the foreign portfolio investors (FPIs), Dhiraj Relli, MD & CEO, HDFC Securities said, “This is the result of FPIs and local investors continuing to invest despite headwinds that cropped up time and again. The absence of a 10 per cent correction in the indices over the last 18 months shows the maturity of the local investors but also throws up the possibility of that happening over the next few weeks/months.”

With the benchmark attaining a new peak, the much-awaited correction too is not far away. Experts agree to the fact that the valuations are at an elevated level.

Anand James, Chief Market Strategist, Geojit Financial Services said, “We remain watchful of markets weighing in rate hike prospects as US treasury yields have begun to firm up, following Fed's taper signals".

Motilal Oswal, MD & CEO, Motilal Oswal Financial Services Limited (MOFSL) also echoed similar views and said, Amid the buoyant sentiment and increased activity, valuations have reached elevated levels and demand consistent delivery on earnings expectations. Given rich valuations, one cannot ignore intermittent volatility.

“However, we expect the positive momentum to continue on the back of improving economic activity and recovery in corporate earnings”, he added.

Mohit Ralhan, Managing Partner & CIO, TIW Private Equity too believes that the valuations of Indian stocks have also increased significantly with the P/E ratio of Nifty 50 Index crossing 27 times of its current earnings.

“With a spike in volatility, we are in a wait and watch mode for a clearer picture to emerge”, Ralhan said.