The final phase of the bull market has benefited the whole market – a difference from previous cases where the rally was led by selected blue chips.
More than 95% of the 500 components of BSE have been tested since the 18th century. In May, when the final phase began, a positive impulse was given. Worldwide, BSE 500 shares represent almost 93% of India’s market capitalisation. Looking at the universe as a whole, the overwhelming 82% of the 2,500 shares traded for BSE in the last three weeks would still have been positive.
The Sensex and Nifty indices and the BSE 500 index, which focuses on broader markets, have been the most important indices since the 18th century. The month of May saw an increase of more than 14%. The market peak was characterised by aggressive repayments by foreign funds against a background of optimism about the economic recovery and the aggressive stimulus measures announced by the world authorities. Most world markets have also made significant progress.
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Global monetary policy remains expansionary and supports risky assets. The U.S. Federal Reserve is increasing its asset purchases and although it has excluded negative interest rates, U.S. real interest rates have become negative. UK government bond yields also indicate that negative interest rates will soon be available. The Executive Board and the ECB will also continue to strengthen the balance sheet, said Amar Ambani, Senior President and Head of Institutional Research at YES Securities.
Market experts note that the positive market dynamics have led investors to look beyond the large roofs, where the reversal of risk is more favourable due to the low valuations that have been in place for several years.
Despite less encouraging economic and microeconomic news, stocks have bottomed out at low levels due to bottom fishing, attractive valuations and the hope that the influence associated with Covid will soon disappear and companies will return to earnings growth, says Deepak Jasani, head of retail research at HDFC Securities.
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In three weeks, more than half of the BSE 500 shares outperformed the benchmark indices. Nearly 70 stocks increased by more than 30%, and a dozen stocks increased by more than 50%.
So is this a good time for those on the sidelines to enter the markets? The experts say we have to be careful.
It’s a good chance, but be careful. We recommend maintaining adequate liquidity of at least 25% at the level of individual portfolios and investing in a gradual and systematic way, without leverage and with sufficient diversification in the sector, said Palka Chopra, Senior Vice President, Master Capital Services.
Those who have invested enough money should think about taking money off the table, feel like experts.
If investors are fully invested in equities as part of their asset allocation plan, it may be time to reduce their equity allocation upwards, create liquidity and benefit from the expected decline. But if they are undervalued in equities, it is time to make incremental purchases of individual shares or MF programs over the next 5-8 months, Jasani said.