Sensex, Nifty rally 10% since Budget Day to hit record highs: What should investors do now?

Market Outlook
Representative image (PC- MoneyControl.Com)

Representative image (PC- MoneyControl.Com)

The blockbuster Budget 2021 not just brought a bonanza for the economy but for investors as well. Investors’ wealth, in terms of the market-capitalisation of the BSE-listed companies, rose by more than Rs 11 lakh crore since January 29, 2021.

Both Sensex and Nifty50 have rallied by more than 10 percent each since Budget to touch a lifetime high of 51,514, and 15,153, respectively, on February 8.

Benchmark indices more than doubled from the March 2020 low caused by the outbreak of the pandemic, but the recovery was swift and the market did not give much time to investors to buy the dip.

For investors who are already sitting on profit should use the rally to book some profits, suggest experts. The rally could extend towards 15,500 in February series, and to 16,000 in the year 2021 on the Nifty50, they said.

“Although the market is high, we don’t see the market is overvalued in terms of the fundamentals but we believe that the market sentiment is at the peak of optimism and an adjustment of it is more likely,” Ashis Biswas, Head of Technical Research, CapitalVia Global Research Limited told Moneycontrol.

“We recommend the investors liquidate 30-40 percent of their holding at the current level at its maximum and wait for a 6-10 percent correction to re-enter or add into the existing portfolio,” he said.

The Budget 2021 has made most of the sectors attractive. The action will be focused on the economy-related sectors as well as consumption. Investors will not look for stocks that are on a growth path; hence, small & midcaps could do well.

“We now believe that ‘Value’ and ‘Growth’ will be the top themes for 2021. As the economy improves, value stocks will see a significant improvement in the financial metrics,” Naveen Kulkarni, Chief Investment Officer at Axis Securities told Moneycontrol.

“The broader economic growth will mean strong earnings growth as well. Quality could take a back seat as ‘Buy Quality at any price’ theme may not work as there will be multiple opportunities across sectors with improving financial metrics and earnings visibility. Nifty December target is at 16,000 with further upside risks,” he said.

We have collated views from various experts as to what investors should do post Budget 2021 after 10% rally in Sensex & Nifty:

Nirali Shah, Head of Equity Research, Samco Securities

The budget has been pro-economy and has made the markets ecstatic. This was reflected by the indices which rose to record high levels without much friction, driven by broad-based optimism.

While the market momentum continues to be strong, certain pockets have more than factored in the growth and therefore we might see some cooling off and short-term profit booking in some sectors in the short-term.

The market is likely to remain bullish as there is no significant negative news event in the near term. On the downside, 14600 is established as immediate support and any break of the same will lead to short-term weakness in the market.

We have a bullish outlook on the market but mean-reverting moves cannot be ruled out. For the Feb series, we believe Nifty may test 15500.

Gaurav Dua, SVP, Head Capital Market Strategy & Investments, Sharekhan by BNP Paribas.

Dips should be used to accumulate quality stocks. We have often seen that correction of 5-8% in benchmark indices in a short period of time along with 10-12% decline in quality companies is always a good opportunity to add/accumulate. Invest for the long haul, do not be too greedy or too fearful.

Jyoti Roy, DVP-Equity Strategist at Angel Broking

We would advise investors to use the rally in the markets to restructure their portfolio and exit stocks that have balance-sheet or corporate governance issues.

We would recommend investors to remain invested in companies with good business models and revenue visibility, which will benefit from the economic recovery.

While largecaps may outperform mid and small caps in the near term, we believe that in the longer run, broader markets will outperform the benchmark Nifty and the Sensex.

Santosh Kumar Singh, HoR at Motilal Oswal Asset Management Company

If the growth starts to pick up, then mid and smallcaps may start to do well compared to the largecaps. However, it would also depend on the sectors as my view is in certain cyclical sectors, largecaps are still to see significant rerating and if the earnings growth starts in those sectors, we may see much better risk reward in largecaps.

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