Bluechips have been playing a catch-up rally in the month of August, driving the benchmark indices to higher levels. As a result, the BSE Sensex scaled 56,000-mark in the morning trade for the first time on August 18. Likewise, the NSE Nifty index crossed 16,700-mark. However, both of these indices failed to hold the momentum. The 30-share index traded 150 points, or 0.27% down at 55642 at around 3 pm (IST). On the other hand, the 50-share Nifty index was down 42 points, or 0.25%, at 16573 at around the same time. Overall, market watchers believe the ongoing bull run will continue and investors will continue to generate robust wealth in the long run.
Here’s what they have to say:
Dhananjay Sinha, MD and chief-strategist, JM Financial Institutional Securities
The markets have shown some buoyancy since the beginning of August this year rising by 4.6%, primarily led by the technology pack which has continued to outperform, rising by a huge 8.5%. The strength seen in consumers and banking stocks recently has been modest. Cyclical sectors such as realty, metals, mid-cap, small cap indices and high beta sectors have seen corrections or underperformance. Hence, the rally is not broad-based, which reflects a lack of conviction. The truncated nature of market performance reinforces the point that the pure liquidity-driven rally and multiple expansion are probably behind us. Global inflexions including rising evidence of peaking global growth which is evident now in China and the US, US tapering – the stance of US central banks and correction in commodity price bubbles will define the market conditions, going forward. High inflation permeating into most countries, especially developed markets, is also significantly contributed by the persistence of supply chain disruptions, which have compounded the impact of post-pandemic demand recovery. While the common belief is that the disruption will linger on for a long time, our view is that we will see evidence of improvement in the coming months, running up to the end of 2021. This in our view should result in a correction in commodity prices; thus providing support to export-oriented and resource-intensive manufacturing sectors, especially in the consumption space.
Santosh Meena, head of research, Swastika Investmart
Sensex is continuing its northward journey with new highs every day for the last five trading sessions supported by inflows in largecap stocks especially IT names. August month is all about large caps after three months of underperformance where Sensex is likely to test the 57,000 marks while 55,800-56,000 is the intermediate resistance zone. On the downside, 55,500 is immediate and strong support while 54,750 will be the next important support at any correction.
VK Vijayakumar, chief investment strategist, Geojit Financial Services
It is interesting to note that the Sensex has multiplied 560 times since its inception with 1979 as the base year. By averaging around 15% CAGR during the last 42 years, Sensex has rewarded long-term investors handsomely. However, the journey of the market has been volatile with sharp ups and downs unnerving the short-term investors and traders. The future would be no different. The present bull run primarily driven by the new retail investors is in an overbought, richly valued zone. This year metal index has been the outperformer with Nifty Metal Index leading with 76 % return followed by the Nifty IT Index with 38% return. But it is important to remember that even sectors with good earnings visibility, like IT and metals, are highly valued. Therefore, even while remaining invested in this bull market, investors have to be cautious while committing fresh funds.
Naveen Kulkarni, chief investment officer, Axis Securities
Midcaps and small caps have seen a sharp rally in the last few months and now some profit booking is visible in the space which is a healthy sign for the market. Investors are now finding comfort in the largecap space which provides more margin of safety over the broader market at current levels. We continue to see the broader market doing well, so any dips should be utilised to build positions in quality stocks where the earnings visibility and the balance sheet strength is very high. Returns from current levels will be more calibrated and focus on quality and value will yield sustainable returns.
Gaurav Garg, head of research, CapitalVia Global Research
The Indian benchmark had a positive start in the market following the positive global sentiments and among the Asian peers. Following the positive sentiments market has been able to touch the levels of 16,700 in the Nifty 50 Index. The positive in the market sentiments remain intact as the efforts from the government to keep the economy on track has started to show results with manufacturing numbers have shown signs of recovery and the services sector is coming back on track as well. Our research suggests that 16,500 will be an important support level in the short term. Indicators suggest a volatile movement in the small range between 16,500-16,700.
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