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Business News/ Markets / Stock Markets/  Sensex, Nifty hit record highs: What should be your investment strategy now?

Sensex, Nifty hit record highs: What should be your investment strategy now?

The domestic equity market hit a record high on Monday after the BJP's stellar win in 3 of 5 state elections. Mizoram election results are being announced today. The outcome gives investors confidence that the incumbent government will retain power in the upcoming Lok Sabha polls.

The domestic equity market hit a record high on Monday.Premium
The domestic equity market hit a record high on Monday.

The domestic equity market hit a record high on Monday after the BJP's stellar win in 3 of 5 state elections. Mizoram election results are being announced today. The outcome gives investors confidence that the incumbent government will retain power in the upcoming Lok Sabha polls.

Moreover, a rise in foreign investor inflows, a fall in US bond yields, strong GDP growth as well as expectations of no more rate hikes have also aided the gains.

The benchmark Nifty jumped as much as 334.6 points to hit a new high of 20,602.50. Meanwhile, the Sensex surged 1,106.6 points to hit a record high of 68,587.82. While the Nifty had also reached a new high in the previous session (December 1), Sensex hit its peak today for the first time since September 15.

Just in the 2 sessions of December, the Indian market has risen over 2 percent.

Mid and small-cap indices also hit their fresh record highs during the session. The Nifty Midcap 100 index hit its record high of 44,148.90, up 1.7 percent in intraday deals, while the Nifty Smallcap 100 index scaled its fresh peak of 14,514.90, up 2 percent in intraday deals.

Read here: At record high! Sensex jumps 1,100 points, Nifty over 300 points: 5 reasons why

"Taking a cue from the political developments and the market reaction in 2019, the market will witness upward momentum until the run-up to the general elections of 2024. Nifty can see the level of 22,000 in the next four to five months. However, since Nifty has already rallied about 1,700 in the past one-and-a-half months, occasional profit booking cannot be ruled out," said Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy.

Going ahead, experts expect market sentiment to strengthen further and the prospect of a pre-election rally is quite strong now. Motilal Oswal, in a recent report, also pointed out that Nifty has given positive returns (9-36 percent) six months into the announcement of general election results (Nov to May) on five previous such occasions. 

Equity markets were justifiably anxious about the outcome of state polls and what it portends for the 2024 general elections. With the outcome overwhelmingly in favor of the incumbent BJP, the confidence of the market in the current dispensation and political continuity post 2024 Lok Sabha elections will get a boost. This augurs well for macro and policy momentum for India, which, at the moment, is seeing the highest growth among major economies, it added.

Read here: SBI, M&M to LT: Motilal Oswal recommends 14 stocks to buy after assembly polls 

"However, a restraining factor will be the valuations which are high and will get stretched further with the rally gaining momentum. In the near-term, the market will ignore fundamentals and move up but soon high valuations will trigger some selling," cautioned V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

What investment strategy should investors follow? Here's what experts say:

Manish Goel, Founder & Director of Research & Ranking

For retail investors who may be feeling left out, there's no need for concern. India's long-term story is still unfolding, with numerous achievements awaiting us. Yet, it's essential to be prepared for fluctuations. Also don’t forget that such markets will always present instances of overvaluation which makes it hard to find good investing opportunities. But if you can get the right advice at the right time, then the path can be very rewarding. Remember, remaining vigilant, staying informed, and maintaining a long-term investment approach will be key.

Mukesh Kochar, National Head of Wealth, AUM Capital

The investable liquidity in the market is huge and has supported well to bring the Nifty a new high. The quarterly result has also shown a good set of numbers from companies and has been instrumental in the current bull run. The recent GDP data has surprised everyone with higher than estimated numbers clearly reflecting the current economy. Manufacturing and mining have shown double-digit growth this time which directly indicates the kind of activity taking place in the economy. The manufacturing is driving growth for a few quarters which is a structural change after a long time. Investors should keep things simple and focus on asset allocation and rebalancing of portfolio.

Anirudh Garg, Partner and Head of Research at Invasset PMS

The current bullish trend ahead of national elections suggests investors may be favoring the incumbent BJP for continued stability. With Indian-centric themes at the fore, the market appears poised to benefit from enduring governance. This scenario underscores the importance of political stability in fostering a conducive environment for market growth and investor strategy.

Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities

Geopolitical risks and rising US bond yields are major worries for global financial markets. We recommend investors to limit their exposure to equities and start increasing exposure to gold and long-tenure debt as we are close to peak interest rates. The allocation to gold and debt should gradually increase as we move closer to Lok Sabha Elections next year.

We like stocks from the auto, banking and capital goods sectors from a medium-term perspective. We would prefer stocks that are trading at reasonable valuations and have good growth potential from these sectors. Rising energy prices can negatively affect oil & gas companies which don’t have much pricing freedom, especially the oil marketing companies. A rising dollar and recessionary fears in China and the USA could put metal stocks under check for the medium term.

Vinit Bolinjkar, Head of Research, Ventura Securities

We are bullish on infrastructure, pharma, consumption (FMCG & consumer durables), engineering & capital goods and PSU banks. These sectors are expected to do well and outperform the broader indices.

Manish Jain, Fund Manager, Coffee Can PMS, Ambit Asset Management

We continue to maintain weight on banks and have increased positions in auto & IT. Recently, we have become very constructive (albeit selectively) on chemicals. However, there is a negligible cash position.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.

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Published: 04 Dec 2023, 11:42 AM IST
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