Sensex, Nifty hit fresh record highs; what should be your short-term and long-term strategy? Here’s what experts say

Mint talked to several analysts to understand what is pushing the market higher and what strategy investors should follow at this juncture for the short and long term. Here’s what they said:

Short term views

Gaurav Bissa, VP, InCred Equities observed that Nifty witnessed some retracement after failing to cross previous lifetime high levels a few days back. However, the index took support from its 21EMA (exponential moving average) on daily charts which has been consistently giving support and pushing Nifty higher. Since then, the index was seen inching higher and gaining strength and finally managed to cross the previous life high comfortably.

“The index is now expected to witness a hurdle around 19,200-19,300 levels where strong call option writing was seen in the last couple of weeks. There is also an ascending trendline resistance placed around these levels. Further upside is expected once it closes above this resistance which can then push it higher. On the other hand, immediate support stands at 16,700 where the previous swing low, as well as 21EMA, is placed,” said Bissa.

Rahul Sharma, Director and Head of Technical & Derivative Research at JM Financial Services is of the view that business goes on as usual post-19,000 level and the noise, volatility and corrections are only there to distract.

“Next time you feel extremely pessimistic – remember that the herd is not always right and it pays to stick to your view. After all, big money is made by betting against the consensus and not with it! We believe this bull run is still on and any dips are to be used as a buying opportunity. Technically, we see 21,000 on the Nifty by this year-end,” said Sharma.

Shrey Jain, Founder of SAS Online – India’s Deep Discount Broker pointed out that the momentum is currently strong. Not only Indian investors are optimistic about the market, but global investors also have a positive view of India’s growth potential.

“Based on the current market sentiment, it seems that we are experiencing a new bull run. In the short term, it is advisable for traders not to try and time the market, trade with discipline and patience. For Nifty, the support range is between 18,850-18,900. Consider implementing a trailing stop loss for your orders,” said Jain.

Long term views

G. Chokkalingam, Founder & Head of Research at Equinomics Research Private Limited is positive about the market for the medium to long term.

“Only one or two rate hikes (at reduced levels) could happen in the US and Europe but after that, the rates should peak out and even start falling in the next six to 12 months. Only Europe has fallen into technical recession otherwise, there is no sign of the US or China falling into recession. Thus, from the external front, except for any possible war in Asia, there is no foreseeable major risk factor for the Indian markets,” said Chokkalingam.

“On the domestic front, except for deceleration in the goods exports, there are several factors which would make India one of the best destinations to invest in the medium to long term,” Chokkalingam said.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said investors should remain invested in the market.

“Long-term investors can continue with their systematic investments. Since valuations are rich, from the short-term perspective, some profit bookings can be considered by investors who do not have a long-term time horizon. High-quality financials are trading at fair valuations even now,” said Vijayakumar.

Anil Rego, Founder and Fund Manager at Right Horizons PMS is bullish on Indian economies because of the country’s strong growth prospects.

Rego underscored India’s economy has grown seven times in 20 years and will be one of the fastest-growing major economies. The last quarter of the previous fiscal GDP numbers was stronger than expected as it rose 6.1 per cent on a year-on-year (YoY) basis and accelerated sequentially from upward revised numbers for the third quarter.

The domestic economy is well positioned for multi-decadal growth as the investment-led infrastructure cycle will have a multiplier effect across the sectors for growth domestically, and structural factors like PLI (production-linked incentive) schemes and FTAs (free trade agreements) with large economies are opportunities for increasing contribution to global exports, Rego added.

“The economy as a whole is relatively better, especially with twin deficits (fiscal and current account deficit) improving significantly, moderating inflation, and expected interest rate cuts cycle are factors that support the growth outlook. Indian corporates have a healthy balance sheet due to deleveraging, banks are reporting robust credit growth, commentaries by management are reflecting strong domestic demand, and earnings have been healthy for the last quarter. All these factors are driving Indian equities to new heights, and we believe there is further headroom for the equities to grow. We recommend being overweight on equities from an asset allocation standpoint and within equities overweight on small caps based on risk appetite since we believe this segment will likely outperform large caps over the next two to three years,” said Rego.

Divam Sharma, Founder of Green Portfolio PMS underscored the positive FPI (foreign portfolio investors) and DII (domestic institutional investors) flow in June.

“Broader US markets and economic trends coming in are indicating a positive direction. Domestic economic indicators are showcasing positivity. We are seeing the flow of institutional money continuing to come into markets even at these levels. There is support from US markets. Interest rate reversal is yet to happen over the coming months, which shall support further PE (price-to-earnings ratio) multiple expansion. Low crude and commodity prices are supporting margins. We are optimistic of a good long term for the Indian markets,” said Sharma.

However, Sharma said geopolitical and domestic political developments can infuse volatility over the short run. So, investors should keep on booking profits in companies which have run up a lot.

“Don’t be leveraged in F&O as markets can be volatile post-achieving all-time highs. Reallocate capital to broader market opportunities in sectors like IT, pharma, and speciality chemicals as good opportunities are available in these sectors,” said Sharma.

Karan Doshi, Senior Analyst and Fund Manager at LIC Mutual Fund said that the Sensex and Nifty hitting record highs is a sign of the growing buoyancy in the Indian economy. It is driven by multiple factors such as strong earnings growth, improving economic fundamentals and cooling off of inflation leading to a pause of the interest rate hike cycle.

“While valuations are reasonable, investors should be prepared for short-term volatility due to global macro headwinds. However, the Indian market has the potential to deliver reasonable returns over the long term,” said Doshi.

Anita Gandhi, Whole Time Director and Head of Institutional Business at Arihant Capital Markets also attributed the rise in the market to the resilience of India’s economy amidst global uncertainties.

Inflation data shows signs of improvement, and the upcoming release of fiscal deficit data for April and May, along with the Eight Infrastructure Industries Index for May, will provide valuable insights into the overall economy. The government’s proactive measures to revive the power sector, including increasing states’ borrowing limits, underscore its commitment to the economy’s backbone, Gandhi pointed out.

The recent approval of multiple fertilizer schemes by the Cabinet Committee on Economic Affairs further aims to boost farm output and ensure food security. With ambitious road construction targets and SEBI’s investor-focused initiatives, India emerges as an attractive investment destination for both domestic and global investors, Gandhi added.

“It is prudent for investors to stay invested in companies with strong fundamentals, sound management, and reasonable valuations. However, they should consider taking profits when valuations exceed the underlying fundamentals. Monitoring indicators like auto sales data for June will provide additional insight into the country’s economic momentum,” said Gandhi.

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Disclaimer: The views and recommendations given in this article are those of individual analysts and brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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