Sensex at 30,000: Where to next

Last week, BSE Sensex touched its all-time high of 30,000 points and NSE Nifty Nifty crossed 9,300-mark. 

On April 26, Nifty recorded an all-time high of 9,367-level followed by Sensex crossing 30,184-mark. 

With this block buster rally, Indian markets have outperformed many developed and emerging markets. 

Both Sensex and Nifty are trading at a 5% premium to MSCI World Index and 40% premium to MSCI Emerging market Index with Nifty being a top performer globally. 

In dollar terms, MSCI India has given a return of 36% on 5-year basis while MSCI-EM has given negative returns at 4%, on a YTD basis.

Vinod Nair, Head Of Research, Geojit Financial Services said, “Well, the good thing is that we are outperforming other market like developed and emerging countries. This is likely to continue led by good reforms and revival in investment cycle.”

Suresh Sadagopan founder of Ladder7 said, “Renewed domestic investor participation especially as all other assets including Fixed Income securities offering muted returns, FII interest in our stocks, DII buying, BJP consolidating it's position signalling stability & continuation of reform agenda, GST and it's potential for benefits, a recovery in earnings of companies etc. are some of the reasons.”

The assets under management (AUM) of the mutual fund (MF) industry saw an exceptional growth of 42% at Rs 17.5 lakh crore in fiscal 2017 from Rs 12.3 lakh crore a year ago.  At the end of April 20, 2017 MFs have a net inflow of Rs 6300 crore compared to negative flow from other domestic institutions, total DII net inflow was at Rs 3200 crore. 

Here are the list of sectors that boosted Sensex and Nifty. 

Sectors like oil and gas, basic material, finance, metal, realty, energy and capital goods have been among top performers on BSE.  These sectors have given more than 30% return in one year. 

Not  only this, some sectors have outperformed both Sensex and Nifty as they have only managed to give about 17% and 16% return respectively. 

Information Technology and Healthcare both were laggard on BSE and NSE in this one year.

Talking on sector-wise performance, Nair said, "The sustenance of Finance sector is likely to continue due to reduction in NPA provisions as asset quality improves gradually, lower cost of funds and momentum in economic activities."

"In the case of Metals and Oil & Gas the future outlook depends on the world economy which during the last 12 months had good economic data with positive economist outlook in the future, " added Nair. 

Is it good time to invest in Indian markets? 

Sadagopan said, "One needs to be cautious at these levels. It is always a good idea for retail investors to participate through the Mutual Fund route. Investing through monthly regular investments is a great way to participate in the stock market & mitigate the risks of market timing. We do not suggest specific sectors but would suggest good diversified mutual fund schemes for investment."

Nair said, "Currently, India is amongst some of the expensive economies of the Emerging Markets with a P/E of 18 on a one year forward basis. We have a cautions view in the near time and expect some consolidation, during which we suggest investors to buy at dip with a long to medium outlook. The out-performer sectors could be Defence, Logistics, Chemicals, Banks, Infrastructure and Auto."

Is 30,000 here to stay? 

Sustenance in the Sensex and Nifty will depend on continued buying by MF, the outcome of tax reform in US accordingly to which FII may return under domestic markets. 

Nair said, "In the end the strength of the market will depend on the Q4 result which has started on a weak note and the implication of GST to the economy."

Sadagopan added, "A lot will depend on the economy & company performances going forward. It will also depend on global events and geo-political developments in the world. Overall, it is expected to be muted this year."