Sensex @ 60,000- What to do Now?

2 min read

2 years ago

The Benchmark Index BSE Sensex has crossed the mark of 60,000 at the fastest pace in terms of 10,000 points move where it took just 161 trading sessions. So, Let’s discuss what should be the move of the investor at this point, should they invest or should they exit?

Introduction:

On Friday 24^th September 2021, the index of 30 well-established stocks- BSE Sensex has crossed the mark of 60,000 for the first time. To achieve this mark, the Sensex took less than a year i.e., just 161 days. The Same day, Sensex touched the all-time high level of 60,333.

What To Do Now?

Since the low of BSE Sensex of 25,981 levels on March 23, 2021
The market has shown a phenomenal bull run, and the index
BSE Sensex has delivered significant returns of more than 130%, 132.2% to be specific
Have reached the landmark level of 60,000 in the last 18 months.
If an individual gets the desired return from the asset class
Then it can be a great opportunity to rebalance the asset allocation.
one can proceed for Asset Allocation Re-Balancing, as the market has yielded returns of 20%
which is more than the rational expectations i.e., 12%-15%.
Also, in this re-balancing, things would be easier for Index Fund Investors or Large Cap Investors
As they don’t need to think much upon which small-cap/mid-cap or others stocks should be sold out.

Key Reasons for the Extraordinary Bull Run in Indian Equities:

i) Global Liquidity:

ii) Why Equity?

The ample amount of liquidity in the Equity Asset Class was due to the TINA Effect which stands for ‘There is No Alternative’.
There was no other asset class other than Equity was there to accommodate such high liquidity.
Almost $1.05 Trillion of Liquidity was infused in Global Stock Markets.
Unprecedented Cash Flows came into Stock Markets.

iii) A Faster-than-expected Earnings Recovery from the Pandemic Lows:

Here, there is a rise in earnings of Indian Corporates by around 30%-35%.
Despite muted topline growth (sales), there is an expansion in operating margins driven by Cost-Cutting Measures due to COVID Pandemic which resulted in an improved bottom line (Net Profit).
There is a strong Earnings Growth estimate post-pandemic of more than 30% in the Consolidated Earnings Growth in FY22 and around 20% in Consolidated Earnings Growth in FY23. Hence the possible earnings growth from the current level is more than 40%-45%.

Morgan Stanley Predictions:

Recently 3-4 months back, the leading Financial Services Company, Morgan Stanley has given the target of Sensex reaching 61,000 levels by the end of December 2021

But this target has come much before the expected period i.e., September 2021.

Hence, this journey from 60,000 to 61,000 might be an easy way for Sensex to touch looking at the current market scenario.

Conclusions:

Investing in the equity market in this situation where the market is trading on all-time high levels, might be quite fearful. But one should not wait for any corrections in the market and should invest in a staggered manner. At this point, one should also control its investor behavior. Do follow due diligence before making any investment decision or consult a financial advisor.