Sensex, Nifty hit record highs: What should be your investment strategy now?


Dec 4, 2023 | by: Manish Goel

The domestic equity market hit a record high on Monday after the BJP's stellar win in 3 of 5 state elections. Mizoram election results are being announced today. The outcome gives investors confidence that the incumbent government will retain power in the upcoming Lok Sabha polls.

Moreover, a rise in foreign investor inflows, a fall in US bond yields, strong GDP growth as well as expectations of no more rate hikes have also aided the gains.

The benchmark Nifty jumped as much as 334.6 points to hit a new high of 20,602.50. Meanwhile, the Sensex surged 1,106.6 points to hit a record high of 68,587.82. While the Nifty had also reached a new high in the previous session (December 1), Sensex hit its peak today for the first time since September 15.

Just in the 2 sessions of December, the Indian market has risen over 2 percent.

Mid and small-cap indices also hit their fresh record highs during the session. The Nifty Midcap 100 index hit its record high of 44,148.90, up 1.7 percent in intraday deals, while the Nifty Smallcap 100 index scaled its fresh peak of 14,514.90, up 2 percent in intraday deals.

"Taking a cue from the political developments and the market reaction in 2019, the market will witness upward momentum until the run-up to the general elections of 2024. Nifty can see the level of 22,000 in the next four to five months. However, since Nifty has already rallied about 1,700 in the past one-and-a-half months, occasional profit booking cannot be ruled out," said Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy.

Going ahead, experts expect market sentiment to strengthen further and the prospect of a pre-election rally is quite strong now. Motilal Oswal, in a recent report, also pointed out that Nifty has given positive returns (9-36 percent) six months into the announcement of general election results (Nov to May) on five previous such occasions. 

Equity markets were justifiably anxious about the outcome of state polls and what it portends for the 2024 general elections. With the outcome overwhelmingly in favor of the incumbent BJP, the confidence of the market in the current dispensation and political continuity post 2024 Lok Sabha elections will get a boost. This augurs well for macro and policy momentum for India, which, at the moment, is seeing the highest growth among major economies, it added.

"However, a restraining factor will be the valuations which are high and will get stretched further with the rally gaining momentum. In the near-term, the market will ignore fundamentals and move up but soon high valuations will trigger some selling," cautioned V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

What investment strategy should investors follow? Here's what experts say:


Manish Goel, Founder & Director of Research & Ranking

For retail investors who may be feeling left out, there's no need for concern. India's long-term story is still unfolding, with numerous achievements awaiting us. Yet, it's essential to be prepared for fluctuations. Also don’t forget that such markets will always present instances of overvaluation which makes it hard to find good investing opportunities. But if you can get the right advice at the right time, then the path can be very rewarding. Remember, remaining vigilant, staying informed, and maintaining a long-term investment approach will be key.

Chat with us