Nifty at 10,000: A long-term investor can still catch the bus

With Nifty touching 10,000 for the first time, most investors who have missed the bus must be tempted to enter the market at these levels.

Afterall the journey from 9,000 to 10,000 has only been a little over 4 months. In contrast, it took 2.6 years for the Nifty to travel from 8,000 to 9,000. And with the liquidity tap open, everyone must be eager to jump on to the bus to make some quick moolah.

Also read: Nifty scales 10,000 mark, Sensex at all-time high: Five factors that led to the rally

The thinking may not be wrong. After all it's a liquidity-driven market. Till the liquidity tap is open, the market is only going one way and that is up. There is no trigger or logical reason for the market rise.

But then market rides on expectation and to fuel that expectation, there is ample liquidity in the market. Therefore the markets are scaling up. This time it also finds support from domestic funds.

While liquidity is the crucial factor, at the end of day it all boils down to corporate performance. As far as corporate performance is concerned, we are almost at rock bottom and from here the probability to improve is high.

Meanwhile, average capacity utilisation of India Inc is between 65 to 70 per cent which means that investment from India Inc is still a distance away. But the market is expecting that the corporate performance will improve which is why it has already discounted FY18 earnings.

Logically, the market has to correct due to its expensive valuation but when there is a surge in liquidity no logic works in the market. However this doesn't mean that one can blindly invest. Even if you have missed the bus, it's not late, but you need to be careful.

It would be best to invest through mutual funds and that too only through systematic investment plan (SIP). Today you can't time the market and therefore the best way is to diversify your money through mutual funds.

Another reason for investing in the market is poor returns from other asset class. The current environment isn't favouring real estate.

Debt returns are low and even if someone wants to play the fixed income market to make capital gains on expectation of a fall in interest rates, it's late as the market has already discounted a rate cut in August 2017.

Any disappointment will only harm returns. Meanwhile, gold too has been a laggard with more or less stagnant to negative returns. So, you are left with equities. While past returns do not guarantee same returns, large-cap funds over the past one year have delivered better returns than any other asset class.

While valuation and earnings do not favour the market, lack of investment avenues means it is always better to start afresh in equities with a cautious approach. You can start small with investment through SIPs.

Allocation to equities even at this juncture isn't bad if you are in for a long haul. Most importantly, while picking mutual funds it is important to see where the fund manager is investing as sticking to quality is a safe option, even if it's costly.