MARKET OVERVIEW :

Currency Market Overview December 28, 2023

Sensex, Nifty 50 hit fresh all-time highs for the second consecutive day; time to book some profit?

Sensex, Nifty 50 hit record highs, up nearly 8% in December so far;

Sensex and Nifty 50 hit fresh all-time high for second consecutive session, driven by banking and financial heavyweights.

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Both the Sensex and the Nifty 50 have jumped about 8 per cent in December so far.

The domestic market is soaring high. Equity benchmarks Sensex and Nifty 50 hit their fresh all-time high for the second consecutive session on Thursday, December 28, on gains led by banking and financial heavyweights.

The Nifty 50 opened at 21,715 against the previous close of 21,654.75 and hit its record high of 21,759.05, rising about half a per cent while the Sensex opened at 72,262.67 against the previous close of 72,038.43 and climbed 0.5 per cent to hit its fresh record high of 72,406.75 in morning trade on Thursday.

Shares of Mahindra and Mahindra, NTPC, Nestle, Titan, Bharti Airtel and Bajaj Finserv witnessed decent traction while those of Axis Bank, Tech Mahindra and Asian Paints, were under some pressure.

Among the sectoral indices, PSU bank, auto and banking were among the top gainers while IT, pharma and media indices traded lower.

The domestic market has been on a strong bullish run since November. Following a 5 per cent gain in November, both the Sensex and the Nifty 50 have jumped about 8 per cent in December so far.

Experts underscore healthy domestic macro numbers, cooling inflation in the US, hopes of rate cuts, sustained fall in the US bond yields and dollar and buying by foreign portfolio investors (FPIs) are some of the main factors behind the rise in the market.

Besides, experts underscore that after steep gains in mid and small-caps, investors’ money is now moving to largecaps due to valuation comfort.

Retail investors’ participation has also been a key factor behind the domestic market’s rise.

Time to book some profit?

While analysts are positive about the market’s prospects for the medium to long term, they flag concern that the sharp rally in the market has inflated the valuations of the market which can trigger some consolidation. Risk-averse investors can book some profit at this juncture.

The volatility index India VIX—which normally rises when markets fall and vice-versa—has risen to a 10-month high, likely signalling trader discomfort at record high levels.

The latest leg of the rally has taken valuations past historic levels, with the Nifty trading at a one-year forward price-to-earnings (P/E) multiple of 19.9 times versus the five-year median of 17.97, with the Sensex P/E at 20.56 times against a historic 18.77 times median. The Sensex one-year forward is, in fact, near a two-year high.

“A significant market indicator is the volatility index VIX rising above 15. Investors should take this as an indication of high volatility ahead. Remaining invested is important in a bull market. But chasing the market at high valuations would be highly risky,”

“The markets tend to remain in an overbought condition with a strong uptrend which is majorly sentiment driven. Going forward, we feel we may see a price or time-wise correction and hence some profit booking is definitely healthy and warranted at these record levels; providing an opportunity to sit on cash and invest on dips if any,” said AN ANALYST.