Sensex gallops 1,000 points in 4 sessions to hit 56,000; experts say largecaps to lead next rally
It’s been fast and furious. Four sessions is all that took the Sensex to zoom 1,000 points—the 30-pack index found 55,000 on August 13 and hit 56,000 intraday on August 18, with a weekend in between.
This is the fastest 1,000-point rally of 2021. The Sensex moved from 50,000 to 51,000 in 10 sessions and took six to reach 52,000. The next 1,000 points were hard work and came after 85 sessions. The journey from 53,000 to 54,000 took 30 sessions but 54,000 to 55,000 was a sprint of seven sessions.
Experts are of the view that the next leg of the rally will be carried by largecap names as mid and smallcaps may see some profit-taking.
“The Sensex is continuing its northward journey with new highs every day for the last five trading sessions, supported by inflows in large-cap stocks, especially IT names,” Santosh Meena, Head of Research, Swastika Investmart Ltd, said.
“August month is all about largecaps after three months of underperformance where the Sensex is likely to test the 57,000-mark, while 55,800-56,000 is the intermediate resistance zone.”
On the downside, 55,500 would be the immediate and strong support, while 54,750 would be the next important support at any correction.
Here is what experts have to say about the market and the way ahead:
Expert: Naveen Kulkarni, Chief Investment Officer, Axis Securities
Largecaps are playing a catch-up in August, driving the benchmark indices higher, while the broader market is in a consolidation zone.
Mid and small-caps have seen a sharp rally in the last few months and now some profit-booking is visible in the space, which is a healthy sign for the market.
Investors are now finding comfort in the largecap space, which provides more margin of safety over the broader market at current levels.
We continue to see the broader market doing well, so any dips should be used to build positions in quality stocks where the earnings visibility and the balance sheet strength is very high.
Returns from current levels will be more calibrated and focus on quality and value will yield sustainable returns.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services
The bull-run, primarily driven by the new retail investors, is in an overbought, richly valued zone. This year, the metal index has been the outperformer with the Nifty metal index leading with 76 percent return followed by the Nifty IT Index with 38 percent return.
But it is important to remember that even sectors with good earnings visibility, like IT and metals, are highly valued.
Therefore, even while remaining invested in this bull market, investors should be cautious in committing fresh funds.
Gaurav Garg, Head of Research, CapitalVia Global Research Ltd
Our research suggests that 16,500 will be an important support level in the short term. Indicators suggest a volatile movement in the small range between 16,500 and 16,700.
Vijay Bhambwani, Head of Research, Behavioral Technical Analysis, Equitymaster
Retail buying continues to push headline indices to new highs. Since no bull is losing money at current levels, there is little chance of profit-taking emerging. It is adding to the buying confidence.
The weekly expiry of index options is triggering a short squeeze (bears being forced to cover short sales). The confluence of these factors is pushing leading markets higher.
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