Experts Advise Caution As Sensex Hits 60,000 Points

The Sensex moved to conquer the 60,000 points with considerable ease. In fact, in just a few weeks the Sensex moved from 56,000 points to 60,000 points.

According to experts, valuation remain rish and hence there could be bouts of volatility. Motilal Oswal, MD & CEO, Motilal Oswal Financial Services Limited, says that the Equity market today had a historical day with Sensex touching 60,000 for the first time driven by large caps with many index heavyweights touching new highs.

"The rally in domestic market is driven by positive global cues, strong inflows by FIIs/DIIs, good corporate earnings, falling Covid-19 cases, upbeat corporate commentaries and low cost of capital. Amid the buoyant sentiment and increased activity, valuations has reached elevated levels and demand consistent delivery on earnings expectations. Given rich valuations, one cannot ignore intermittent volatility - however we expect the positive momentum to continue on the back of improving economic activity and recovery in corporate earnings," he stated.

Santosh Meena, Head of Research, Swastika Investmart was quoted by PTI saying that the roaring bull market continued in the Indian market with climbing all walls of worries where Sensex has crossed the new milestone of 60,000.

"We are in a classical bull market like the 2003-2007 phase where this bull run is likely to continue for the next 2-3 years," Meena said.

Many analysts believe that the markets are trading at significant premium to long-term averages, and the immense liquidity is what is pushing the Indian markets higher. Liquidity from both domestic institutional investors, particularly mutual funds is driving the markets and stock markets tend to remain irrational for long periods of time. Mohit Ralhan, Managing Partner & Chief Investment Officer of TIW Private Equity, says: "The Sensex touched a historic high of 60,000 today for the first time. The bull run in the Indian market has continued abated on the back of strengthening the economy and reduced expectations of any serious third wave of COVID-19. While the sentiments remain extremely positive, the global cues are pointing towards a cautious approach, given the unfolding debt crisis at China Evergrande Group and impending start of tapering by the US Fed. The valuations of Indian stocks have also increased significantly with the P/E ratio of Nifty 50 Index crossing 27x. With a spike in volatility, we are in a wait and watch mode for a clearer picture to emerge.

Investors are advised caution and some stocks like IT stocks could react should economic growth around the world falter. Also, rising inflation could be a matter of concern for stocks going forward.