NEW DELHI: India’s equity market has been scaling new highs with every passing day. The Sensex on Friday breached the 58,000-mark and closed the day at 58,129.95, up 277.41 points, while the Nifty gained 89.40 points to close at 17,323.60.
The 30-share index has zoomed 10,248.67 points or 21.46% so far in 2021. In the last month, it has rallied 6.92% while in the last 5 sessions (which include Wednesday’s fall), it has surged 2.68%. This rally has pushed market capitalisation of BSE-listed companies reaching a record high of over Rs 253 lakh crore on Friday.
The valuation, according to some experts, has reached such a level that a correction is imminent. Unmesh Kulkarni, Managing Director and Senior Advisor at Julius Baer India has pointed out that lofty valuations of the Indian equity markets along with the sharp run-up are a matter of concern.
“The markets are currently discounting a fair bit of the earnings story, and the margin of safety is increasingly reducing; any disappointment on the earnings front, on account of slower-than-expected demand recovery or higher-than-expected margin pressure, could lead to a contraction in market valuations,” Kulkarni said.
He added, “Given the recent sharp run-up, it is likely that markets enter a phase of consolidation and witness a 10% correction too. In fact, some pockets of the market have already started seeing some consolidation/correction, although the headline Nifty has been creating new highs.”
Likhita Chepa, the Senior Research Analyst, CapitalVia Global Research, said that a consistent rise in the Coronavirus cases and fear of a third Covid wave is driving investors towards defensive bets. “We can expect a recovery in the market near the level of 16200 (Nifty50) and gain momentum, leading to an upside projection till the level of 16450-16500.”