The Sensex has recently crossed the monumental 80,000 mark, stirring a whirlwind of emotions among investors. In the throes of this bull market, sentiments range from regret to anticipation. Those who waited for a market correction are now hesitant to enter at these lofty levels, lamenting their earlier inaction. Investors who ventured in wish they had committed more funds, while those who sold are now plagued by remorse. Meanwhile, some anticipate an imminent crash, and a few believe the market will continue its upward trajectory indefinitely.
Have All Positives Been Priced In?
A pertinent question arises with current valuations, have all the positives of India’s growth story already been factored into the market? The Reserve Bank of India’s Financial Stability Report sheds some light on this. It examined the 12-month forward price-to-earnings (P/E) ratios, revealing that while the Nifty 50 and Nifty Smallcap 100 are trading near their historical averages since 2019, the Nifty Midcap 100 is trading one standard deviation above its historical average.
What are the structural changes at play?
| Domestic Structural shifts | Global Structural Shifts |
| Structural Changes in the Domestic Economy | High Interest Rates: Maintained by central banks. |
| Several transformative developments have reshaped India’s economic landscape: | Geopolitical Tensions: Impacting trade and supply chains. |
| GST Implementation: Streamlining tax processes. | Sluggish Global Growth: With China’s economy faltering. |
| Corporate Tax Rate Reduction: Boosting corporate profitability. | Shifts in Supply Chains: Benefiting countries like India. |
| PLI Schemes: Promoting manufacturing and defense indigenization. | |
| Rise of Global Capability Centres: Enhancing services exports. | |
| Improved Infrastructure: Both physical and digital. | |
| Retail Investors: Increased participation in capital markets. | |
| Structural Changes in the Global Economy |
The Liquidity Factor
Investor sentiment is overwhelmingly bullish, driven by strong inflows from both Indian and global investors. Additionally, India’s allocation in global emerging market funds increased to 18.3% in March 2024, up from around 14% a year earlier. The Financial Stability Report also warns that capital flows to India’s financial markets could be influenced by geopolitical risks, tightening global financial conditions, and other global spillovers.
What should investors do?
As the Sensex reaches unprecedented heights, it’s crucial for investors to remain grounded. While the market’s current state reflects a blend of domestic and global structural changes, navigating these waters requires a blend of strategic foresight and emotional discipline. By adhering to long-term investment principles and maintaining a balanced perspective, investors can better manage the inevitable ups and downs of the market journey.
Mutual fund strategies differ significantly from direct stock investing. Instead of aiming to book profits, halting new investments, or heavily investing in stocks based on market movements, long-term investors with well-diversified portfolios should maintain their steady course. Those who regularly invest through Systematic Investment Plans (SIPs) should continue to do so, understanding that markets tend to rise over the long term despite short-term fluctuations.
India is currently experiencing sustainable growth, political stability, and clearer reform policies, which are expected to drive multi-year GDP growth. For those who have not invested in the past, the current market highs should not be a cause for concern. Building a well-adjusted portfolio is still possible, even at elevated market levels. Through proper asset allocation and a disciplined investment approach, investors can manage perceived market highs effectively.
Frequent rebalancing based on index movements can induce unnecessary anxiety and may diminish the compounding effect over the long term. How an investor reacts to all-time highs in the equity markets should be aligned with their individual financial goals, risk tolerance, and investment time horizon. It’s crucial to understand the long-term potential of equities and to consult with financial advisors or distributors before making any portfolio adjustments.
Avoid the fear of missing out and refrain from making impulsive investments. Even at high market levels, prudent investing can help you capitalize on market opportunities and achieve your financial goals.
Market this week
| 01st July 2024 (Open) | 06th July 2024 (Close) | %Change | |
| Nifty 50 | ₹ 23,993 | ₹ 24,324 | 1.4% |
| Sensex | ₹ 79,043 | ₹ 79,997 | 1.2% |
- The broader indices touched record highs and outperformed the main indices in the week ended July 5.
- Benchmarks also hit fresh highs, rallying for the fifth straight week.
- Key upcoming events for the market include macro factors, the Union Budget, and Q1FY25 earnings.
- Individual stocks will be in focus over the next few weeks due to Q1FY25 earnings and management commentary.
- Sector performances: Nifty Information Technology index jumped 4.3 percent, Nifty Pharma index rose 3.6 percent, Nifty Media index gained 2.7 percent, Nifty Oil & Gas index rose 2.6 percent.
- Foreign institutional investors (FIIs) bought Rs 6,874.66 crore worth of equities this week.
- Domestic Institutional Investors (DII) remained net sellers, selling equities worth Rs 385.29 crore.
Weekly Leaderboard
| NSE Top Gainers | NSE Top Losers | ||||
| Stock | Change (%) | Stock | Change (%) | ||
| Infosys | ▲ | 5.2 % | Titan | ▼ | (4.0) % |
| ONGC | ▲ | 5.1 % | HDFC Bank | ▼ | (2.1) % |
| HCL Technologies | ▲ | 4.1 % | IndusInd Bank | ▼ | (2.1) % |
| Wipro | ▲ | 3.9 % | Shriram Finance | ▼ | (1.6) % |
| Coal India | ▲ | 3.9 % | Bharti Airtel | ▼ | (1.0) % |
Stocks that made the news this week:
- RBL Bank’s shares fell over 4 percent to Rs 255 each on July 5 following a sequential decline in its total deposits and current account savings account (CASA) for Q1FY25. Year-to-date, the stock has declined over 7 percent, underperforming the Nifty 50’s 11 percent rise. Previously, RBL Bank shares reached a 52-week high of Rs 300 per share on January 11, 2024
- Raymond’s shares surged 18.5 percent to a record high on July 5 after the board approved the demerger of its real estate business, Raymond Realty. At 11:02 am, the stock was trading at Rs 3,392.45 on the NSE, down from its peak of Rs 3,484. The demerger aims to consolidate Raymond’s real estate operations into a single entity to capitalize on growth opportunities and attract new investors. As part of the plan, Raymond will issue 6.65 crore shares of Raymond Realty with a face value of Rs 10 each, giving shareholders one share of Raymond Realty for each Raymond share held, with no cash or alternative considerations involved.
- Angel One’s shares rebounded by 3 percent after a four-day losing streak, driven by revised market intermediary charges. The company saw a 3.7 percent month-on-month increase in its client base to 2.47 crore in June, marking a 64.2 percent rise year-on-year. Additionally, the total number of orders grew by 6 percent month-on-month and 87.3 percent year-on-year to 16.80 crore, while the average daily turnover rose 4.4 percent to Rs 45.74 lakh crore in June.
