Nifty valuation at all-time high, Sensex near 50,000; should you invest more, pause, or book profit?

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January 13, 2021 4:59 PM

In today's session, headline indices opened strong but soon witnessed volatility on tepid global cues and consistent selling pressure at higher levels.

stocks in focus, HDFC, maruti suzukiMarket particpiants will continue to look at the fine print of the Union Budget 2021, along with corporate earnings, foreign fund inflows, oil prices, rupee movement and other global developments for further cues.

BSE Sensex and Nifty 50 are riding at all-time high levels on hopes of a stimulus, and overall bullish sentiment. On Wednesday, NSE’s Nifty ended almost flat but at a record high of 14,564.85 points. Earlier, on Tuesday, Nifty settled at 14,563.45 and hit a record high valuation of 40x. According to the data available on the National Stock Exchange, the index closed the previous session with a P/E multiple of 39.94.

Likhita Chepa, Senior Research Analysts at CapitalVia Global Research, told Financial Express Online that since the valuations are quite high, the chances of short term correction have increased. Nifty has already crossed the crucial 14,550 and now all eyes are on Sensex as 50,000-mark would be crucial for the Indian benchmark index.

Also read: What will drive share market rally in 2021: Strong Q3 earnings, improved economy; but valuation concerns loom

BSE Sensex is just over 500 points away from its interim resistance level of 50,000. According to an analyst, there are high chances for the Sensex to breach this level as the Q3 results of most of the firms are expected to be better than the previous quarter.

Where will Sensex, Nifty head from current levels?

In today’s session, headline indices opened strong but soon witnessed volatility on tepid global cues and consistent selling pressure at higher levels. Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online that in the bullish market, an intraday dip is a buying opportunity till the time there is no big down day. When major indices are at an all-time high, one should adopt buy on dip strategy. The current rally may continue till Nifty is above 14470 on a closing basis. Wagh also added that on the higher side, the Nifty may run towards 14710.

Also read: Volatile session sees Sensex, Nifty end flat; here’s what experts make of today’s trade

What should be investors’ strategy?

Technical analysts expect more bullishness ahead of Union Budget 2021. This year, the Union Budget will be presented on February 1, 2021, in the parliament. Last month, Union Finance Minister Nirmala Sitharaman said that this budget shall be ‘unlike anything in the past 100 years’. Rajesh Palviya, Head Technical & Derivatives, Axis Securities, told Financial Express Online that investors should remain invested in the market and trail their stop loss higher than 14200-14000 level. FII strong buying flows indicate that this rally would continue and Nifty can scale up towards 15000 level in the short term so buying on dips continues to be our preferred strategy.

Chepa advised traders and short investors to abide by strict stop loss. While long term investors should find opportunities to buy in a correction phase. An analyst at Kotak Securities said that correction in Indian share market cannot be ruled out if Nifty and Sensex trade below 14435 and 49100, respectively. Below the said levels, correction will likely continue up to 14400-14300 for Nifty and 49000-48650 for BSE Sensex. “On the other hand, 14650/49700 would be the immediate hurdle for the bulls, above the same, the index could rally till 14700-14735/49850-50000,” said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.

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