'Markets to remain volatile in near-term'

Investors with high risk appetite must stay invested while risk-averse investors can consider profit booking.
Puneet Wadhwa and Nikita Vashisht report.

The 30-share BSE Sensex index scripted history on September 24, 2021 as it breached the 60,000 mark for the first time, ending the session at 60,048.47.

Crucially, the index took just 91 sessions to climb the latest 10,000 points.

It had hit the 50,000 mark for the first time on May 18.

Expensive valuations and a cautious global mood because of the developments in China and the possibility of a third wave COVID-19 may trigger mild profit booking in the days ahead, but most analysts remain optimistic and suggest a market correction, if any, should be bought into from a medium-to-long-term perspective.

"Over the next few years, one can get 12-15 per cent compounded return from the market. Frontline indices can double from the current levels over the next five years. A 10-15 per cent correction can happen at the index level in the short term, but such corrections are par for the course," says Jyotivardhan Jaipuria, founder and managing director, Valentis Advisors.

"In the last 20 years, only in two calendar years we did not have a 10 per cent correction. A prudent strategy will be to buy the dips rather than sell stocks on a rise," suggests Jaipuria.

Thus far in 2021, the S&P BSE Sensex has rallied over 25 per cent.

Among Sensex stocks, Bajaj Finserv, Tata Steel, State Bank of India and Tech Mahindra have been the top gainers that have moved up 56 per cent to 108 per cent, ACE Equity data show.

Despite this sharp rally, Gaurang Shah, senior vice-president at Geojit Financial Services, expects the market correction, if any, to be short-lived.

Investors with high risk appetite, he says, must stay invested while risk-averse investors can consider profit booking.

Market returns, he says, are likely to be polarised with stocks of companies doing well operationally and financially getting rewarded at the bourses.

"Sensex hitting 60,000 is just the start of a strong bull run in the Indian markets. People must accept the fact that high stock market returns are a possibility in India now," says Shah.

"Developments in China are already discounted. Asset allocation should depend on risk appetite, time of horizon of investment, and return expectations. Buying anything and everything now will not generate returns," Shah says.

Among sectors, the BSE Metal and BSE Realty indices have gained the most -- up nearly 75 per cent and 59 per cent this year.

The auto, bank and healthcare indices, on the other hand, have gained the least -- between 12 per cent and 23 per cent, ACE Equity data show.

Rupen Rajguru, head of equity, investments and strategy at Julius Baer, expects the markets to remain volatile in the near term as participants dissect India Inc's September quarter earnings, monitor central bank (Reserve Bank of India and the US Federal Reserve) policies and other events.

From a two-three year perspective, Rajguru remains constructive on Indian equities on strong economic rebound and better-than-expected corporate earnings.

Feature Presentation: Aslam Hunani/Rediff.com