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The Bulls are exuberant

Updated: May 9, 2023

But is it time to declare a win just yet?



Markets crashed frightfully in March 2020 in a matter of days due to Covid-induced lockdowns that were imposed around the world. However, things have now escalated quickly with the SENSEX and NIFTY, hitting their all-time high in just over a year’s time, with the Nifty index scaling the 16,000 level for the first time in August 2021. India’s benchmark stock indices rallied to new heights, as investors remain optimistic about the present growth momentum.


This has been led by retail investors who allocated more into equities even as foreign investors sold stocks worth over Rs 10,000 crore in July. But is the present rally a positive indicator for new investors coming in or does the economy still have any value to offer going forward?


Let’s find out!





What’s cooking in the Markets?

  • One of the biggest drivers to this rally in the stock market is the strong performance by Indian corporates across sectors in the first quarter. The top 1000 profitable companies have witnessed their profit pool increasing from INR.6.5 Trillion since March 20 to INR 10.8 Trillion by March 21.


  • Indicators such as rising manufacturing activity, higher exports, and declining fiscal deficit have contributed to optimism in the stock market this week. GST collections rose above Rs 1 lakh crore in July, up 33% from Rs 87,422 crore in the corresponding month last year.


  • The rush in initial public offerings has also kept market sentiments high in 2021 as it has led to more investors entering the stock market. As more companies go public, there has been an increased participation from Retail Investors in order to gain from the current momentum in the stock market. With Rs 27,000 crore getting raised from the IPOs for the current year, liquidity can be an issue moving forward.



What does this mean for your portfolio & what should you do next?


  • You would see probably see your friends and family speak about the returns they’ve made in the last 12 months. However, very few have been able to demonstrate the same performance over the last 24 months. The test of a winning portfolio is how it stands over the long term. Look for portfolios, teams, and managers that have won over the 24-month period, or even better, a 60-month period.


  • For those of you not completely invested over the last year, it may seem like you need to throw your weight into the ring looking at returns everybody is making, but this is exactly the time to be cautious. Markets are fickle-minded creatures, and those ecstatic now may be depressed tomorrow, including some crazy valuation stocks. So think through your portfolio carefully and use talented and experienced advisors to help you build a sustainable return portfolio — not just one based on past performance.


  • Liquidity is not forever: The RBI has maintained an accommodative stance looking at pandemic fears, but with inflation heating up, would slowly start increasing interest rates in the coming quarters as the economy revives. Look at your debt portfolio and heated equities and rebalance, prune, and reallocate to a portfolio that would do well in a higher interest rate environment, especially longer durations in bonds, commodity pricing backed run in cyclical equities, and rallied up commodities like gold.


 

Take charge of your investments and ensure their growth - check your portfolio health today!


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