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The longer term view remains positive given the strong tailwinds in a host of industries: Gaurav Awasthi

The BSE barometer of top 30 firms, S&P BSE Sensex, reached the 50,000-mark for the first time on Thursday, hitting a record high of 50,140 in opening deals. The market capitalisation of listed firms on the BSE, too, touched a record high of Rs 199 trillion.

Sensex’s journey from 45,000 to 50,000 currently is the fastest 5,000-point rally in the history of Dalal Street’s oldest equities index and was completed in just 48 days. It’s run from 40,000 to 45,000 levels took 561 days to accomplish.

According to experts, Foreign Portfolio Investors have been the main driver behind the market rally in India. After the initial bout of selling in the earlier part of 2020, FPIs have been consistently buying Indian equities so far. As per the data available with the NSE, In the year 2020, FPI made a net equity investment of Rs 1.5 lakh crore into the Indian market.

Vijay Chandok - MD & CEO, ICICI Securities said- "Sensex crossing the important milestone of 50,000 is a telling sign of economy and markets shifting orbits on broad-based recovery and better days ahead. The combination of strong capital inflows, low interest rates and leaner balance sheet of India corporates along with government measures for growth is expected to lift the economic growth ahead. The same is likely to resonate in capital markets, thereby keeping the markets buoyant in the long term."

Global markets have remained supportive so far. Yesterday Wall Street hit new records and stock markets across the globe climbed after US President Joe Biden took office on Wednesday as traders were joyful over his plan to inject even more stimulus into the world's largest economy.

Investors' sentiment turned positive after the government managed to contain the spread of the coronavirus. Fresh Covid cases have fallen from a peak of more than 1 lakh daily cases to around 15,000 per day now, which boosted hopes of faster economic recovery and further opening of the economy.

Gaurav Awasthi, Senior Partner, IIFL Wealth Management said "Sensex at 50K is a psychological feel good factor and has no significance on the decision to invest or exit from equity markets. The relevant yardsticks to look at for investing include the current valuations and future earnings trajectory of underlying companies. The longer term view remains positive given the strong tailwinds in a host of industries including IT, pharma and manufacturing. However, the current valuations do warrant some caution with likelihood of increased volatility in the short term."

Experts also believe that the forthcoming Budget, just 10 days away from now, will also prove to be critical for the markets, as it may showcase the government’s agenda for reforms and growth of the economy going forward. Many also believe that as Sensex crosses 50k, valuations look stretched. Valuations are a function of earnings, and earnings are not coming through making it a key risk at the current juncture.

"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"- said Motilal Oswal, MD and CEO, Motilal Oswal Financial Services.

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