The Indian stock markets are currently witnessing a super sharp upward rally. Both Sensex and Nifty are riding the bull and reaching out for record highs. At 60,117.51 points, the Sensex has breached the psychological 60,000-mark, a feat it had first achieved in October 2021. Driven by the momentum, the combined market capitalisation of all 5,000+ companies on the Bombay Stock Exchange (BSE) has also crossed Rs 280.54 trillion.
Even NSE Nifty, which is presently at 17,906 points, is knocking hard at the 18,000-mark. Rising anticipations of the US Fed slowing down on interest rate hike, along with rising foreign investment in Indian markets, meant thriving activity on both BSE and NSE. Notably, foreign investors had opted out of the Indian markets over the last nine months, redeeming over $2.5 lakh crore worth of equity investments.
However, July 2022 saw a roaring comeback by these foreign investors, who ploughed in around Rs 5,000 crore in the markets. And these investments have already exceeded Rs 36,716 crores this month.
Opportunity for Investors?
After a dreary, dull global market in 2022 so far, this uptick presents a good opportunity for both new investors to take the plunge and for veteran investors to review their portfolios. But according to Agra-based financial planner Shifali Satsangee, founder & CEO of Funds Vedaa, the present rally is driven less by fundamentals and more by liquidity.
“At the moment, Indian markets are looking expensive. Hence, new investors should take the systematic investment plan (SIP) or transfer plan (STP) to enter. While SIP is ideal for wealth creation and optimising risk and returns, STPs allow investors to benefit from market volatility”.
Mumbai-based CFP Nisreen Mamaji agrees. “Additionally, new investors should consider investing in dynamic asset allocation mutual funds,” she says.
Satsangee concurs. “As part of their core portfolio, new entrants should go for Flexicap funds. They have a broader equity investment spectrum to invest in since they invest a minimum of 65% in this asset class. The fund manager also has the flexibility to dynamically manoeuvre between different market capitalisations depending on market conditions and existing valuations in each segment”.
“Large & midcap funds which allocate a small portion of the investible corpus into international equities could be part of the portfolio. A combination of active and passive investing strategies can be used while constructing a portfolio for a new investor. Index funds can make for a great strengthener to the portfolio,” she says.
Viral Bhatt, who runs MoneyMantra, which offers personal finance and investment solutions, asks investors to take it slow and stay put. “Don’t see the markets, rather spend time in the market. Timing the market is an irrelevant and useless exercise.”
For long-time investors, this is the chance to review the performance of their portfolios and bring everything up to speed. “It’s crucial for seasoned investors to check and review their portfolios. This will help you weed out stocks that are not actively contributing to your ultimate financial goal and grab new, well-performing stocks,” adds Bhatt.
For investors whose goals are inching completion, partial profit booking in the markets, but in staggered amounts can also be considered.
While veteran investors are already aware that time and not timing is the key to success in the markets, they should not lose their cool in the panic of the moment. “Do not act emotionally when indices are low or sell in greed when indices are high,” notes Mamaji.