Sailing on Cloud Nine

As I pen this editorial, the Sensex is already up by more than 7 per cent in 2021, beating some of the major global indices such as DJIA (3 per cent) and S & P 500 (5.03 per cent) by a healthy margin. Such is the market frenzy that as many as 37 stocks have already more than doubled on YTD basis and we are only in the second month of the year. Add to these another 687 stocks that are up by more than 15 per cent. Investors could not have asked for a better 2021. Further, this year’s daring and risk-taking budget by Finance Minister Nirmala Sitharaman, while a surprise, has surely been a welcome sign. 

It clearly shows that the government means business and is not ready to play it safe just for the sake of staying in power. The liberal opening of coffers to spur the economy at the cost of fiscal deficit is a bold move, but in the right direction. This very attitude displayed by the government is now strongly propelling the markets. It has given the Indian corporates and business community the much-needed confidence to go aggressive with expansions. We should see some good participation from the private sector in the coming days.

With everything being gung-ho, what are the downsides one should be aware of at these levels of valuation? There are two areas that one needs to be tread on carefully. First, there is a likelihood of the international rating agencies like Moody’s and S & P downgrading India. This implies that India may slip into a junk investment grade. This can create a blip in the market with FIIs getting cautious. Secondly, the lined-up public sector units (PSUs) issues that are likely to open for subscription this year will tend to divert investment from the mainline stocks to these public issues, putting a strain on the indices’ movement. So, keep an eye on these as you work on your portfolio to maximise wealth.

Any equity market rally backed by quality earnings can be a durable one and should be respected no matter how sceptical you may be about the soaring equity prices. To understand exactly where the positive earnings’ surprise is coming from, we have analysed the latest earnings season in our cover story. Sector-wise analysis of earnings will help you decipher the performance of corporate India and will also help you take crucial portfolio decisions. Always remember, it is extremely important to align your portfolio with earnings. In one of our special stories, we have discussed at length some of the market indicators that can come in handy to understand the market trends and thus can help both to protect profits and minimise losses in case there is sudden reversal of trends.

Our other special story focuses on swing trading and its application. The way the market is behaving right now, swing trading can prove to be extremely profitable. Do read the insights shared by our experts. The year 2021 looks like an epic year-in-making for equity investors as the setup is shaping up in such a way that is suggestive of a long bull run. But that does not mean one can go full throttle at the current levels. Buying on dips will be an extremely profitable way to participate in this market. It is possible only if you can show enough patience. Remain selective in picking stocks and insure your portfolio by diversifying intelligently.

RAJESH V PADODE
Managing Director & Editor