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It's time to turn cautious on equities

It's time to turn cautious on equities
There is frenzied buying in stocks across the globe with the Dow Jones scaling new and higher peaks, while stocks in Europe have now hit 5 year highs.

Indian markets rallied this week on the gush of foreign inflows with stocks like HDFC, HDFC Bank and ITC scaling new heights. Maruti also hit a new 52-week high on hopes that the falling Yen will help improve margins.

The Sensex crossed the 20,000 mark this week and is set to scale higher levels as foreign liquidity pushes shares prices higher. The Nifty closed at the highest level for 2013.

From FMCG to auto to banking sector stocks, investors have lapped up stocks at feverishly high prices. Some of the price to earnings multiple and price to book value multiples are already stretched for most of the Sensex companies.

Markets will await the remainder of the earnings season with the likes of Larsen and Toubro, State Bank of India and ITC yet to declare their results. Inflation data will also be eagerly watched next week.

Foreign funds have made record purchases in equities, despite the fragile political situation in the country. It maybe time to be a little cautious on equities after the fast and furious run. Politically, things are not looking too good for Prime Minister Manmohan Singh, while economic fundamentals have hardly improved. Chasing stocks at higher prices is one reason why investors have lost money in the past. It's best to be a little cautious now.

Read more about: sensex nifty
Story first published: Saturday, May 11, 2013, 10:38 [IST]
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