No one saw it coming—the Sensex at 50,000 or Ajinkya Rahane lifting the Border Gavaskar Trophy at the Gabba. Cricket is said to be the game of glorious uncertainties but the Indian market seems to be vying for the honours as well.
The market sank into a COVID abyss when the lockdown was announced in late March 2020, a turnaround and that too marked by new highs was unthinkable, just like Team India. Bundled out for a humiliating 36 in Adelaide, a series win against the mighty Aussies in their backyard was not on the horizon. But history was made a few days later in Brisbane, just like it was made by Sensex on the morning of January 21.
“The Sensex touching 50,000 in 2021 is like Indian cricket team winning test series in Australia against all odds of COVID-19,” Nilesh Shah, Group President & MD, Kotak Mahindra Asset Management Company, said.
“While economic data is about the past, which is improving month on month, the Sensex is reflecting the positivity about the future.”
Also read: Sensex@50K! Don’t fear the dip, have faith in Indian story: Experts
The Sensex has almost doubled from the lows of 25,638 recorded back in March 2020. The average market capitalisation of BSE-listed companies has now swollen to Rs 198 lakh crore (intraday) as on January 21.
Valuations are a concern but experts are not worried. The Nifty is trading at a 12-month forward P/E of 21.4x, a 14 percent premium to its long-period average. Its P/B of 3x is at a 17 percent premium to its historical average, Motilal Oswal said in a report.
The Nifty’s 12-month trailing P/E of 27.7x is at a 39 percent premium to its long-period average of 19.9x. At 3.3x, the Nifty’s 12-month trailing P/B is above its historical average of 2.8x.
India imposed a locked down from March 25, 2020 when the known coronavirus infections were around 500. Markets went into a tailspin. India’s COVID tally is now more than 10 million but the vaccine has boosted the sentiment.
With more than Rs 1 lakh crore inflows in 2020, experts don’t see the liquidity tap of foreign central banks running dry anytime soon. The need to support growth will keep central bankers pumping in more money and that will keep markets buoyant across the globe.
Also read: Sensex above 50,000! Is the market in a bubble that is about to pop?
New COVID cases are going down in India, which is a positive sign, and expectations from the upcoming Budget 2021 are boosting sentiment.
Strong macro data and earnings from India Inc support the argument that growth is around the corner.
“The Sensex touched the historical levels of 50,000 today for the first time ever. Indian markets have been witnessing strong momentum over the past few months on the hopes of a faster economic recovery after the pandemic lockdown,” Motilal Oswal, MD & CEO, Motilal Oswal Financial Services Ltd, said.
“Also, positive global cues, sustained FII inflows and strong corporate earnings kept the sentiments high. The buzz around the upcoming Budget has also added strength to the markets,” he said.
The budget could lay the foundation of a long-term economic growth path, Oswal said. “Overall, we expect the market to continue its upward journey on the back of healthy corporate earnings, strong liquidity, positive developments on the vaccine front, broad-based economic recovery and low-interest rates,” he added.
Also read: New retail investors are from Tier II and III cities, demat accounts see a spike
The stupendous rise seen in markets is a testimony to the fact that nothing is impossible and investors should retain their faith in equities despite few dips, which would anyway come in the journey towards wealth creation.
“The Sensex has crossed a physiological benchmark level of 50,000, which is almost double from the March low. This journey has been a remarkable one for the Sensex, with a CAGR of 10 percent in the last ten years, and the final 10,000 points rally happened in the past couple of months only,” Naveen Kulkarni, Chief Investment Officer, Axis Securities said.
“FIIs are continuously buying Indian equities, while the quantum of DIIs selling has reduced significantly in the last few days, which is a positive for overall sentiments. If positive earnings momentum sustains, then we could see more such milestones in the time to come,” he said.
Retail investors
Just like nobody was expecting a 15 percent absolute return for benchmark indices, the year 2020 also saw a rush of new investors.
Extended lockdown could have played the part where investors got more time to study their portfolio and execute the trade themselves.
According to the Securities and Exchange Board of India (SEBI), close to 6.3 million new demat accounts were opened in the last nine months, tallying the total count to 44.46 million.
Also read: 10 million new demat accounts and counting, why retail investors’ love affair with market will continue
More investors joining the D-Street is a welcome sign and it also means financialisation of saving from physical assets to financial assets. MF Asset under Management has risen by 17 percent to Rs 31 lakh crore in 2020.
“The Sensex crossing the 50K mark highlights equities as a critical component in an investment portfolio and underscores its importance in long-term wealth creation,” Ravi Kumar, Co-founder and CEO, Upstox.
The trend is fast-moving from metros to Tier II and III cities, say brokerage firms, which is a positive sign. More demat accounts in non-metros reflect deeper penetrations of equity markets.
With the Sensex crossing 50,000, data available with BSE shows that as many as 6,00,92,402 investors were registered with BSE by the morning of January 21, which is 2.98 percent up month-on-month, 7.42 percent up quarter-on-quarter and 27.37 percent up year-on-year.
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