Nifty at a high, but only 11 stocks are at record levels: A warning or an opportunity?

Market Outlook

The Nifty50 hit the magical 15,000-mark early this month and hit a fresh record high of 15,257 on February 9 but only 11 stocks in the index have reached their record highs, so far, in the month.

It should not come as a surprise as most stocks are still playing catch up. The 11 stocks that hit their lifetime highs include Adani Ports, Bajaj Auto, Bajaj Finance, Bajaj Finserv, Cipla, HDFC Bank, SBI and UltraTech Cement, data from AceEquity shows

Nine stocks like Tata Motors, M&M, L&T, Sun Pharma, ITC and Power Grid Corp are trading at 52-week highs.

Nifty Index_001

The rally, which we saw in 2020 and is continuing in 2021, lifted most of the largecaps names in the index but there is plenty of upside still left in many stocks, experts say.

“Many stocks are showing that they can lead from here or take rally further such as in FMCG –ITC. In pharma, Lupin and Sun Pharma. In IT, Infosys can lead from here compared to TCS. In banking, SBI. So, there are plenty of stocks in which upside is left and could well turn out to be leaders,” Ravi Singhal, Vice Chairman, GCL Securities Limited, told Moneycontrol.

“In terms of Nifty target, we see the index heading towards 17,600 in the base case scenario in 2021, and in the best case, it could well hit 18,900 while in the worst-case scenario,  the index could be around 15,900,” he added.

The Nifty that closed above the psychological mark of 15,000 on February 8 has come a long way after it was launched in April 1996, when it traded at 1,107, with the base year of November 1995 set as 1,000.

The Nifty50 took nearly 18 years to reach 7,000, the next 8,000 points come in 6.8 years, Motilal Oswal said in a report. The Nifty 50 Index constituents make up roughly 58 percent of the total India market cap.

If we look closely, the sprint to 15k from pandemic lows of 7,600 in March 2020  has taken just 220 days.

The sharp recovery has been driven by a global liquidity backdrop, better containment of COVID-19, sharp recovery in corporate earnings and a market-friendly Budget, said the Motilal Oswal report.

“There is plenty of upside still left on the Nifty 50 names. We are looking forward towards 16,308-16,848 to 17,200 for the Nifty50,” Sacchitanand Uttekar, DVP–Technical (Equity), Tradebulls Securities, told Moneycontrol.

Jashan Arora, Director at Master Capital Services, told Moneycontrol that if the Nifty50 move above 15,500, the next target will be in the range of 16,200-16,400 in 2021

Multibaggers: What should investors do?

There are 16 Nifty50 stocks that have risen 100-400 percent since April or so far in FY21, data from AceEquity showed.

Stocks that more than doubled investors’ wealth include names like Tata Motors, M&M, JSW Steel, Bajaj Finance, HCL Technologies, Hero MotoCorp, Bajaj Auto, and Cipla.

Data suggests that stocks that have more than doubled investors’ wealth since March belong to economy-linked sectors, finance as well as IT. After the recent run-up, investors can look at booking partial profits but the long-term investment argument still remains intact.

“Out of the 16 names, one can book profits in the following stocks as they are close to our revised price targets and also trading closer to their peak valuations: Adani Ports, Bajaj Finance, Bajaj Finserv, Bajaj Auto, Shree Cement and Ultratech Cement,” Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities told Moneycontrol.

“We are still bullish on the banking stocks like HDFC Bank, ICICI Bank and SBI. We also like Cipla and Bharti Airtel from a one-year perspective,” he said.

Uttekar of Tradebulls Securities said that the stock hitting fresh high with volumes is a good sign, which highlights the willingness of participants to buy quality irrespective of the higher pricing.

“Investors should continue to hold these stocks & maintain a trailing stop strategy based on larger degree time frames,” he added.

The stock market is more about investing in the future prospect of companies and sectors. The Budget 2021 promised capex in sectors such as infrastructure, healthcare, Make in India as well as real estate. Financial services remain the top pick.

“Many companies in Nifty50 which have doubled wealth continue to have strong fundamentals and growth prospects. If anyone had invested in these companies in March 2020, they had entered at one of the best times. Despite these companies giving fabulous returns in one year, investors should continue to hold them,” Harshad Chetanwala, Co-Founder- told Moneycontrol.

“If required one can look at trimming as part of these companies and book profits. At present, it is will be good to hold on with these companies for some more time as a pro-growth Budget after a difficult year, the pace of recovery in economic activities, and reasonable success of COVID vaccination can add more fuel to India’s progress,” he said.

Most of the sectors gave positive return in 2020 and with the Budget, which has something or the other for each and every sector, they will not disappoint investors. Hence, picking largecap names which are sectoral leaders will be a safe strategy for investors in 2021, experts say.

Given the recent run-up seen in most names, some consolidation cannot be ruled out. But, the long term trend still remains intact.

“All the sectors have rallied we can assume that there is not much upside in short term but since the longer-term trend is intact, we may see strong moves post consolidation or corrections in the index,” says Arora of Master Capital Services.

Ideally one should focus on booking partial profits in the stocks they hold but it was important to remain invested, he said. “It is quite probable that India is on the cusp of a multi-year economic expansion cycle. If this pans out, the bull market will sustain and grow stronger. So remain invested in quality stocks in performing sectors,” he said.

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