September 20, 2021 06:04 PM
The recovery from the biggest decline in the S&P BSE Sensex in March last year and the subsequent rally to successive new milestones have mesmerized traders and investors as the bulls retained their charge over Dalal Street – barring intermittent consolidation – even during the second wave of the pandemic.
The Sensex crossed 50,000 for the first time on January 21 this year and has taken just eight months since then to surpass 59,000, closing well above that mark at 59,141.16 on September 16.
The Nifty 50 on the National Stock Exchange, after a few days of consolidation at 17,300-17,400, climbed past 17,500 on September 15 and 17,600 the next day to end at 17,629.50.
The entire rally has been attributed largely to the easing of pandemic-related restrictions, the opening up of the economy, the recovery in growth and earnings, the availability of ample liquidity along with the delay in tapering by the US Fed, a low interest rate environment, and measures by the government and the Reserve Bank of India to revive the economy.
Many experts are convinced the Sensex can cross the 60,000 marks by the end of September – over the next 10 sessions – and could more than double by 2025. For the Nifty 50, the short-term target is 18,000, which may be achieved in the current year itself.
“We are in a roaring and classical bull market where the Nifty and the Sensex continue to achieve new milestones and I believe this bull run may continue for the next two to three years while intermediate corrections or shakeout phases can’t be ruled out,” said Santosh Meena, head of research at Swastika invest Mart.
He said the bullish momentum may continue in September and take the Sensex past the 60,000 marks.
“But I think we may see a correction after that; therefore, October could be a month of correction,” he said.
.“I wouldn’t rule out the possibility of Nifty touching 19,000-20,000 either, but the shorter the time frame, the more uncertain the prediction,” he said on September 9.
Ambani said then he envisioned the Sensex hitting 125,000 by December 2025, given the slew of conducive factors, including a pronounced business shift from the unorganized sector to the organized space, a marked acceleration in the digital super cycle and sustained margins from prudent cost management enforced by the pandemic.
The government’s focus on infrastructure, introduction of production-linked incentive schemes to encourage domestic manufacturing and increase self-reliance, and the China+1 sentiment will help India as the cost of capital stays benign and inches up gradually, he added.
On September 15, the government announced a relief package for the financially stressed telecom sector and offered incentives to encourage local manufacture of electric and hydrogen vehicles and drones. The measures are aimed at making India a manufacturing hub for the world, which will not only increase investments and jobs but also make the country more self-reliant.
“The scheme is aimed at supporting the manufacturing and adoption of electric/hydrogen fuel cell vehicles and the localization of advanced technology components. The PLI scheme, which will be effective from FY23, is likely to bring in fresh investments of over RS42,500 crore and incremental revenues of over RS 2,30,000 crore in the five-year period,” Emkay said in a note.
What will drive the next rally and what should investors do?
Metal stocks have advanced strongly in the past eight months with a 76 percent rally, followed by the power index, which rose 48 percent. Gains in the IT, healthcare, capital goods, FMCG, oil & gas, energy, telecom and realty indices ranged from 18 percent to 34 percent.
The Banker rose 15 percent, whereas auto was the biggest underperformer, with a more than half a percent loss amid supply-demand issues.
Rahul Sharma, cofounder of Equity99, said banks will perform well because they haven’t yet participated in the rally. He expects the Sensex to climb to 60,500 and the Nifty to touch 18,000 in the short term. His long-term estimates for the two indices are 66,000 and 20,000, respectively.
“We don’t recommend any fresh buying at this level as the markets have made a huge move in a short time. We advised investors to keep a strict stop-loss to their positions. Some correction is required to get a good valuation to enter fresh in the market, but scenarios which we are witnessing, along with the developments from the government, will surely keep us in a bull run, except if any global scenario changes take place,” Sharma said.
Meena of Swastika Invest Mart advised investors to remain invested in this bull run while exiting stocks with quality concerns.
“Those who are not comfortable after a massive rally can go through the SIP route to ride this bull run,” he said.
Ambani of Yes Securities also advised long-term investors to hold on to their investments.
“One can invest even at these elevated levels by adopting a stock-specific approach. If one finds a leg-down opportunity in the market, one can gainfully exploit it,” he said.