Closing Bell: Nifty ends above 17,350, Sensex rises 167 pts led by IT, realty stocks

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September 06, 2021 / 03:48 PM IST

Milind Muchhala, Executive Director, Julius Baer:

The Indian markets continue to clock new highs, aided by contributions from a few index heavy weights. However, the broader markets seem to be witnessing some signs of exhaustion, after the healthy rally seen in the past month where India was the best performing markets with gains of around 9%. In fact, a small correction would be welcome at this juncture and help the markets to become healthier, although the trigger for that currently seems elusive and it could just be a part of broader global correction.

The underlying sentiment, however, remains quite constructive, well supported by steadily improving economic data, positive earnings expectation and a healthy pick up in daily inoculations, and investors would be on the look-out for intermittent corrections to add positions.

The retail consumer demand will be closely monitored as we enter the festive season and as the restrictions continue to ease, albeit the concerns on the third wave of the pandemic. While the US job data over the past weekend disappointed, it could be supportive for equity markets as it might prompt US Fed to go slow in their tapering plans. We expect sector rotations to play out in the market, with some of the recently underperforming sectors such as financials, auto and healthcare to see better market interest.

Sensex at 58,000: Here’s what you must do if the market corrects now

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Is the equity market overheated? Analysts and market experts say valuations are stretched, but the main indices and even the broader benchmarks continue their ride upwards.

But, over the last two months, the advance-decline ratio of stocks has slipped below 1 for the month of August. This means more stocks fell than those that rose. Though you could put it down to company specific factors, the three recent Initial Public Offerings (IPOs) in August have had a negative closing on listing day.

All this doesn’t mean equities will necessarily fall. But, it is possible. Another possibility is that prices might move sideways for a long time rather than correcting or moving up sharply.

This equity rally has lasted 17 months, so it’s easy to forget what a sharp correction looks like. When such corrections do happen, we panic and react, which can be detrimental to our long-term investment portfolio. If markets correct, then here are five things which you must do.

Do nothing

Do not exit equities. This is easier said than done. If you own a portfolio of stocks, within a few days you may see prices correction 20-50 percent. When markets corrected in March 2020, even a 10-year mutual fund SIP showed negative returns for a few schemes. Panic sets in.

But as a recent IDFC mutual fund study showed, investors who continued their systematic investment plans (SIP) after the COVID-19 crash are now winners. The 10-year SIP returns today present a much prettier picture.

Only redeem if you need the money

You may take money off the table if you think you would need it in the next six to 12 months. This will ensure that your immediate needs are unaffected by market events.

For instance, you would have been saving up to send your children abroad for their education. If your savings are tied up in equity markets and if stocks start to fall, that can dent your corpus. Redeem the required amounts when you see markets fall. The equity market may not recover as quickly as it falls.

Invest more in equities

Be opportunistic. When markets correct, it is the best time to enter. When you invest at lower prices, you are securing potentially better returns for the future. Buying low is the best opportunity to accumulate for to your long-term portfolio. Top up your investments, whenever possible, in a market correction. You must ideally not wait till markets hit the rock bottom, because you can never really predict when the lowest levels would be touched. The best way to approach this is staggering your top-ups over a period of 4-6 months.

Do not change your asset allocation

Keep a close watch on your asset allocation. If, as per your risk tolerance, you should invest, say, Rs 70 in equities out of Rs 100, then that is what you should continue to have in equities.

If markets correct and this ratio gets altered, then restore it. Keep in mind that this change of allocation is happening as your overall portfolio value is falling. Ideally, the shift out of equity should have happened when the portfolio value was rising. Keep these safeguards in mind before fixing your asset allocation.

Sell bad stocks

One thing that a correction allows you to do is to separate the bad apples and exit them. You may exit at a loss, but if it’s a laggard stock, chances are that its price will not recover even in a subsequent rally. It’s best to book losses, which can then be set off against capital gains from other sources.

Closing Bell: Nifty ends above 17,200, Sensex gains over 500 pts led by IT, FMCG stocks

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September 02, 2021 / 04:11 PM IST

Shrikant Chouhan, Executive Vice President, Equity Technical Research, Kotak Securities:

Markets were back in action after yesterday’s small correction and benchmark Nifty found support near 17050 level. After a muted opening the index successfully cleared the intraday resistance of 17150 and is comfortably trading above the same which is largely positive.

The intraday rally indicates further uptrend from the current levels but the market has formed a double top kind of formation. For the trend following traders, 17150 would be the key support level, and above the same the uptrend structure could continue up to 17300-17350 levels. On the flip side, if the Nifty slips below 17150, it may trigger a quick intraday correction till 17100-17075 levels.