The Sensex reached a historic high on April 9, 2024, breaching the 75,000-mark milestone for the first time, propelled by strong Q4 earnings. The market closed slightly lower at 74,684 on account of profit booking, and the Sensex currently stands at 74,903.43 on April 10, 2024 at the time of writing.
Market analysts view this high as a precursor of future growth, as it will instil confidence among investors. However, financial advisors have asked investors to take cautionary measures.
For one, the outcome of the Lok Sabha elections is a major influencer of market trends. Further, the interest rate dynamics in the US and major European economies, along with how the monsoon season goes in India, can impact investor sentiments, according to market analysts.
However, global factors are not expected to have a major impact, because of India’s robust macroeconomic performance. Also, the recent huge influx of retail investors can set off any impact of foreign capital outflows.
Financial experts say that interpreting the market’s all-time high as a signal for correction or as an event of celebration is wrong, as this is a fairly common event.
Basavaraj Tonagatti, a certified financial planner (CFP) says, “The Sensex recently breached the 75,000 mark. However, this isn’t a moment for celebration; rather, it’s a time to exercise caution. Investors should carefully review their asset allocation. If there’s a significant tilt toward equity, it’s advisable to engage in rebalancing activities to mitigate risk. Additionally, if one’s financial goals are short-term, it might be prudent to reduce exposure to equity. On the other hand, for those with a long-term perspective, maintaining the usual investment strategy is acceptable, provided they assess the balance between equity and debt holdings.”
Many investors doubt if they should sell their stocks when the market hits an all-time high and buy again later. But the problem is that such an approach only considers the exit point and fails to consider when people should re-enter the market. While all-time highs may trigger some market corrections, most of them are typically followed by more all-time highs. So, a readjustment in portfolio is sufficient, though not a foolproof method, as the stock market cannot be predicted. For systematic rebalancing, one should shift equity gains to debt if it exceeds 70 per cent. But one should reduce equity further as one’s goal nears, say in three years. In such a case, whenever the market hits an all-time high, it is advisable to adjust the portfolio mix 40:60 in equity and debt.
If you have a long investment horizon and you are investing in mutual funds through a systematic investment plan (SIP), there won’t be much difference between continuing and pausing your SIP when the market hits new highs.
Says Swapnil Kendhe, a Securities and Exchange Board of India-registered investment advisor (Sebi-RIA): “Investors having time, interest and knowledge required to do enterprising investing can worry about index levels. But all other investors are better off focusing on asset allocation in their own portfolios, and not worry about Sensex/Nifty levels.”
The broader indices are showing mixed results. Small-cap sectors witnessed gains yesterday on the back of buying from domestic institutional investors, while mid-cap and large-cap sectors ended flat.
In sectors, such as metals, financial services, realty and healthcare, shares were in demand while shares of public sector banks, consumer durables, media and fast-moving consumer goods (FMCG) declined as par NSE data.
