Benchmark equity index S&P BSE Sensex gained more than 300 points on Thursday to cross the 50,000 mark for the first time ever, as the market rushed to new all-time highs tracking positive global cues after Joe Biden’s swearing in as the US President.
The Sensex index jumped as much as 334.61 points, or 0.67 per cent, to touch 50,126.73 at the strongest level of the day, and the broader NSE Nifty 50 benchmark climbed to as high as 14,738.30, adding 93.6 points, or 0.64 per cent, to its previous close — both all-time highs.
Analysts say the current rally continues to be driven by liquidity and even though things look fine, investors should be cautious and focus on quality stocks.
“I am happy, however I don’t know how long this journey is going to continue in the current form considering that it is a liquidity-driven market with overstretched valuations,” market expert Hemen Kapadia told ETMarkets.com.
“We advise caution. Even though things are fine in terms of faster-than-expected economic recovery and an unexpected rise in GST collections, historically, we don’t sustain these PE ratios,” Kapadia added.
Echoing similar views, Joseph Thomas, Head Of Research, Emkay Wealth Management, said: “As the Sensex crosses the 50k, the valuations do look stretched. The valuations are a function of earnings and earnings not coming through remains the key risk at the current juncture.”
“The liquidity expansion by the central bank and the ample FII driven liquidity, a V shaped recovery of growth aided by the discovery of vaccine, and most recently the change of guard in US have been some of the factors propelling markets higher and higher,” he added.
“It is a journey. I have seen Sensex touching 3,000 to 4,000 to 10,0000 to now 50,000. It is just one milestone in an ever growing journey,” said Nilesh Shah, Group President & Managing Director, Kotak AMC.
“I don’t think the market is overvalued by a big margin. It is just that it is looking at the future with a lot of positivity. Now, if those corporate earnings materialise, those growth materialises then Sensex will continue to rise. But please remember that Sensex will go up and down. From its fair value, it can become cheaper and more expensive. Very few people will be able to predict how Sensex will move in short term.”
Abhishek Chinchalkar, CMT Charter-holder and Head of Education, FYERS, said: “Risk assets worldwide have reacted quite positively post Joe Biden’s inauguration as the US President… Both Nifty and Sensex have surpassed their prior week’s high of 14,653 and 49,795, respectively. This in turn has negated the Spinning Top candles that formed on the weekly charts last week.”
“With global risk appetite quite positive, index heavyweight sectors such as banking and IT showing strength, and the largest component Reliance Industries resuming its rally after several weeks of consolidation, Indian markets look set to extend gains further in the short-term. For Nifty, the immediate upside is now at 15,000; while for Bank Nifty, the corresponding upside is at 51,500. Immediate support is now placed at 14,650 for Nifty and 49,700 for Sensex,” he added.
