Fast and Furious, Sensex @ 50K

There is a stark similarity between the Indian cricket team and the leading Indian stock market benchmark the Sensex. Both are fast and furious. Indian cricket team has proved its mettle against mighty Australians earlier this week. The Sensex fought its battle against all odds put forward by the COVID-19 virus and achieved a fete of scaling a peak of 50,000. The journey for Sensex was swift. It traversed the last 5,000-point in 32 trading sessions and its ascent from 40k to 50K was completed in just 100 days.

Nilesh Shah, Group President and MD, Kotak Mahindra AMC said, “Sensex touching 50,000 in 2021 is like the Indian cricket team winning a test series in Australia against all odds. While economic data is about the past, which is improving month on month, Sensex reflects the positivity about the future.”

After the Sensex made its debut on the Bombay Stock Exchange (BSE) in April 1979 with a base point of 100, it took 41 years to reach 50k.

Sensex crossed 1,000 in July 1990 and touched 10,000 in February 2006, after 16 years. The 20K level was achieved in December 2007 after 20 months. It crossed 30,000 in March 2015 after almost eight years. The Sensex touched 40,000 in May 2019 after four years, and after six months it crossed 41,000 in November 2019.

However, from its November 2019 level, it began to suffer a setback, which and fell to 25,639 on 23rd March 2020.

However, the comeback was the fastest in its entire journey as it regained all lost ground in almost 11 months. Pharma, IT, metals and selective banking stocks were the major contributor for the index taking it from 40,000 to 50,000 in 100 days.

Though exuberance prevails in the market fuelled by abundant liquidity provided by the foreign portfolio investors (FPIs), market experts ask investors to be cautious. FPI inflows, which had declined during the last few days, have again turned strong crossing Rs 2,200 crore on Wednesday.   

While enjoying this bull run, investors should not be carried away by the euphoria. At high levels, markets are vulnerable to corrections, says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Deepak Jasani, Head of Retail Research, HDFC Securities echoed similar views. He predicts a temporary brake on the uptrend. Further up-moves from hereon will depend on the pace of economic and corporate earnings growth and the trajectory of inflation and interest rates in India and the world.

“As the Sensex crosses 50k, valuations of stocks look stretched,” said Joseph Thomas, Head of Research, and Emkay Wealth Management.

Markets are expected to remain volatile till the union budget presentation on 1st February.

“The ideal strategy should be to buy on dips, buy between 49,600-49,500 and keep a final stop loss at 49,200 for the same. On the other side, the market can scale higher with the uptrend wave likely to continue up to 50800 – 51750. The focus should be on commodities and auto companies”, said Shrikant Chouhan, Executive Vice President, Equity Technical Research, Kotak Securities.