Solid gains in the Indian stock market across segments drove the cumulative market capitalisation (mcap) of BSE-listed firms to over an all-time high of ₹460 lakh crore, or $5.5 trillion, for the first time on Tuesday, July 30.
Until July 29 close, the Indian stock market benchmark, the Sensex, has gained 13 per cent, while the Nifty 50 has risen over 14 per cent. The Nifty Midcap 150 index and the Nifty Smallcap 250 index have surged 27 per cent each this year so far.
The Sensex hit its all-time high of 81908.43 on July 29. The Nifty 50 almost touched the 25k mark on the same day as it hit its all-time high of 24,999.75 during the session.
This market rally has been led by strong retail participation amid prospects of solid economic growth and anticipation of the start of the US rate cut cycle, thanks to easing inflation.
The number of investors registered with BSE now stands at nearly 18.4 crore, u 33 per cent year-on-year. Experts observe that 8-10 lakh new investors are coming into the market every week.
Of late, the rich valuation of the market has emerged as the top concern but its failed to deter the enthusiasm of retail investors.
“Sustained capital flows into mutual funds, and the retail investor’s enthusiasm will keep the market resilient. The elevated valuations are a concern, particularly in the broader market. A healthy trend in the market now is that high-quality stocks with good earnings visibility are gaining strength when buying by institutions,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
While the medium-to-long-term prospects of the market remain healthy, experts warn that the market may correct sharply if it encounters any negative trigger.
The biggest risk for the market is unknown unknowns, which cannot be predicted. Any negative trigger in terms of geopolitical tensions, a trade war, or an event that has a global impact may trigger a sharp correction in the market.
“At high valuations, unexpected triggers can cause market corrections. Therefore, investors have to be a bit cautious about chasing stocks now. Partial profit booking in segments that have run up too much too fast may be considered,” said Vijayakumar.
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