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BW Businessworld

Nifty Just 5% Shy Of The 10000-mark

The bellwether indices continues to inch higher, and the coveted 10,000 mark does not appear too distant

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Stock markets are charting new territories every day as the Nifty seems to be steadily inching its way to levels of 9600 – and eventually to levels of 10,000. 
The Nifty closed at 9525 points, just 75 points shy of the important psychological 9600 mark. Analysts point out that the going by the way the money is flowing into the Indian markets, five-figure levels of 10,000 on the Nifty appears a distinct possibility in the next 3 months.

The good news is that the in May foreign investors have trained their lens back on to the Indian markets. Foreign investors have poured Rs 1,831.23 crore in May 2017 so far as compared to a substantial withdrawal out Rs –6,627.56 crore in April 2017.

If the trend continues, analysts expect that both strong domestic inflows into the markets and foreign inflows will continue to drive Indian stock markets higher.
Currently, stocks are high on liquidity surge into the Indian markets, even as the Q4 results have shown a mixed trend. Metal, oil and banks have delivered decent results the last quarter, and remains one of the key reasons for the increased buoyancy in the markets.

Analysts expect the liquidity driven surge to continue as domestic investors continue to deploy their savings into the Indian markets. Alternative asset classes that compete for investor funds such as real estate and gold are not seen as attractive asset classes. Prices of gold have remained sluggish in the recent past hovering at levels of Rs 27800 levels.

Stock market valuations, though, are not comforting. The Nifty is currently quoting at a PE of 24 times trailing earnings. The outlook for the earnings is also not looking quite robust, as companies have shown mixed results. Brokerages expect a substantial recovery in earnings in the market only in FY19. In the current year of FY18, earnings growth is expected to remain patchy and in lower single digits.

Experts, however, point out that investors should remain selective in the markets, and invest in companies only where there is reasonable margin of safety or where there is good growth ahead. Given that many stocks have delivered double-digit returns this calendar year, the margin of safety – the vital yardstick that pundits recommend investors must consider – has diminished considerably.

For investors considering investing in the markets now, a longer time horizon of 3-5 years is desirable. Many stocks in the market are already priced to perfection leaving little room for a substantial upside gains.
Experts also point out that a better strategy is to keep a watchful eye out on market movements and swoop in on favourite stocks only on market corrections.

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