Sensex@50K: Dalal Street excited, but supremely cautious too

By Sandeep Singh

It’s Mount 50K for the Sensex, the Dalal Street can’t hide the excitement. But there was caution in abundance.

“I am happy. However, I don't know how long can this journey continue in the current form, considering that it is a liquidity-driven market with overstretched valuations,” said Hemen Kapadia, a chartist and trader.

“It is a journey. I have seen Sensex touch 3,000 to 4,000 to 10,0000 to now 50,000. It is just one milestone in an ever-growing journey,” said Nilesh Shah, Group President & Managing Director, Kotak AMC.

“I don’t think the market is overvalued by a big margin. It is just that it is looking at the future with a lot of positivity. Now, if those corporate earnings materialise, those growth materialises then Sensex will continue to rise. But please remember, Sensex will go up and down. From its fair value, it can become cheaper and more expensive. Very few people will be able to predict how Sensex will move in the short term.”

Joseph Thomas, Head Of Research, Emkay Wealth Management, said: “As Sensex crosses 50k, valuations look stretched. Valuations are a function of earnings, and earnings are not coming through. That remains a key risk at the current juncture."

Domestic equity benchmark S&P BSE Sensex gained more than 300 points in opening trade on Thursday to cross the 50,000 mark for the first time ever, as the market added to the ongoing gains on positive global cues after Joe Biden's swearing in as the US President.

"We advise caution. Even though things are fine in terms of faster-than-expected economic recovery and an unexpected rise in GST collections. Historically, we don't sustain these PE ratios,” Kapadia warned.

Most analysts said investors should be cautious and stay focused on quality.

“The liquidity expansion by the central banks, ample FII-driven liquidity, a V-shaped recovery of growth aided by vaccine rollout and most recently the change of guard in the US have been some of the factors propelling the markets higher and higher," said Thomas of Emkay Global.

The Sensex index jumped as much as 334.61 points, or 0.67 per cent, to touch 50,126.73 at the strongest level of the day, and the broader NSE Nifty 50 benchmark climbed to as high as 14,738.30, adding 93.6 points, or 0.64 per cent, to its previous close -- both all-time highs.

5,000-pts gain in 32 sessions

"It is a momentous day for India's capital markets. The gain of last 5,000 points came in just 32 sessions. Expectations of a turnaround in the economy post Covid vaccinations and continued FPI flows have led to this kind of gains in a globally low interest rate scenario," said Deepak Jasani, Head of Retail Research, HDFC Securities.

"After the forthcoming Union Budget, we may witness temporary brakes to the uptrend, and further upmoves from here on will depend on the pace of economic and corporate earnings growth, inflation trajectory and interest rate movements in India and the world," he said.