With Sensex @70K, Nifty @21K, where does one invest fresh money?

Analysts suggest buying near Nifty 20,000, considering it an entry point into a globally recognised ‘island of safety.’

Indian stocks are enjoying an uninterrupted bull run on Dalal Street as strong liquidity flows into undervalued government-owned public sector units (PSUs), frontline blue chips and freshly minted IPOs boost prices.

The benchmark 50-share Nifty climbed to a record 21,000 points and the 30-share warhorse Sensex hit a record peak of 70,000 points as deep-pocketed investors have bet upon rising political stability and continuity of policies of the ruling Bharatiya Janata Party after last week’s stunning electoral victory in three major states.

So, what from now on? Where should new investors, having the feeling of missing out on a fabulous bull run, go? In other words, where should the fresh cash go in a market scaling higher and higher peaks!

“At this point of time, putting 50-60% of fresh money into blue chips such as Larsen & Toubro, Ultratech and Maruti Suzuki makes sense. The remainder can be invested in infrastructure themes such as ACE Equipment, TexRail and Sanghvi Movers,” said Mayuresh Joshi, Head of Research at William O’ Neil Securities.

Joshi’s bet on blue chips makes sense. Nifty, up 15% so far in 2023, has lagged the stunning 40% rise in the BSE Midcap index as also the 42% surge in the BSE Smallcap index over the same time.

“It is a catch-up trade,” Joshi said. “The Nifty has not done much at all over the last 2 years in terms of headline numbers, whereas earnings growth (EPS) has surged. So, valuations even at 21,000 levels are inexpensive.”

SHOW ME THE MONEY!

Among the primary reasons for this dramatic upsurge in stock prices is surging inflow of funds from retailers (SIPs via mutual fund schemes) monthly. Systematic Investment Plans, which deploy tiny amounts regularly each month, have surged to a record Rs 17,000 crore in November, showed data from industry body AMFI.

The other 8,000-pound Gorilla in the investing world is the advent of family offices set up by deep-pocketed promoters, who have either sold equity in IPOs or have exited their businesses outright by selling to rivals or PE funds. They are a huge force to reckon with in anchor allotments, in QIPs and during market hours within the cash segment of stocks.

So, sustained buying support by mutual funds, on behalf of retail investors, old-time favourites – Ultra HNIs and PMS fund managers – plus the return of foreign funds to Indian shores are now creating a Goldilocks scenario for domestic equities.

CAUTION AHEAD

The only point of issue here is that no one seems to be worried about Indian equities correcting sharply from current levels. And this, to my mind, is the biggest worry!

India has all good things firing up on a macro-level too – strong GDP numbers, a vibrant and a booming banking sector – an envy globally – robust GST receipts, inflation mostly in control and record foreign exchange reserves to boot!

But is it all baked in the price?

Mostly, yes. But any dip towards 20,000 on the Nifty is a point of purchase, said analysts, as it represents an entry point into one of the finest “islands of relative safety globally”.

Shailendra Bhatnagar, Chief Analyst & Editor Markets, penned this piece for Business Today. 

Views are personal and do not represent the stand of this publication.