Mistakes to avoid when markets are at record high levels

• Follow

At the time when the benchmark equity indices BSE Sensex and NSE Nifty are hovering at their record high levels, Rahul Sharma, Co-founder, Equity99 believes that investors should now avoid entering companies with overstretched valuation. He believes that only good companies will outshine from this point in time. Considering the present market conditions, he advised short-term investors to keep strict stop loss.

He added that there is some fear among retail investors as the market is making new highs every day. Sharma believes that Nifty may find strong support at 17,225. In case, if it breached the level then the index may fall towards 17,150- market. The 50-share index topped 17,300-mark in the early trade on September 3.

On the upside, Shah added that 17,340 will act as a major hurdle point for Nifty. If it crosses the level thereafter 17,400-17,500 is achievable if global cues continue to stay favourable. Commenting on the broader market, he advised investors not to make fresh investments in the midcap and smallcap space. However, he sees headline indices at higher levels by Diwali considering the government’s initiative to improve health and economic crisis.

“I am trying to zero in on undervalued stocks right now as many counters are in overstretched position,” he said adding banking is the sector that may outperform going ahead.

“I think banks will outshine and push the market further up,” he added. Sharma is positive on Kolte Patil with a 12-month target price of Rs 350. “The company has been generating positive free cash flow and reducing debt. It also has strong liquidity,” Sharma said.

The market watcher is also positive on Sun Pharma with a target price of Rs 950 and Power Finance Corporation (PFC) with a target price of Rs 170. “PFC has superb return on equity and it is also a regular dividend paying company,” he said.