While the Indian equity market continues to trade at record high levels, will this momentum sustain? Will the investors be booking profits or will they be holding stocks?
It seems that investors have decided to walk away with the profits which they have seen over the past few months. Frontline indices i.e., Sensex and Nifty 50 ended the trading session lower for 2nd consecutive session on 3rd January, as geopolitical worries impacted Indian equities. This prompted investors to book profits in the stocks trading at record valuation.
Geopolitical worries impacted Indian equities
Now, the readers should know that there are 2 points which are responsible for overall market decline seen on January 3, 2023.
Firstly, increased geopolitical tensions continue to impact the market sentiments, with expectations of rate cuts tapering off.
Secondly, solid market upswings and improved momentum which we all have seen in past two months led to higher market valuations. Since most of the favourable factors have been already factored in, the investors have gone way of booking profits.
Let us now see what a leading brokerage firm has to say about this!
Motilal Oswal Financial Services believes that Nifty’s P/E continues to near historical average, with P/B (price-to-book-value) trading above average. Nifty continues to hover around ~12-month forward P/E ratio of ~19.6x. This is near LPA (long period average) which is of ~20.2x (i.e., ~3% discount). This brokerage firm opines that 12-month trailing P/E for Nifty, which is at ~22.9x, remains higher than its LPA of ~22.2x (~3% premium).
Indexes trading the day lower
Sensex kicked the day off at ~71,832.62 levels, in comparison to previous close of ~71,892.48 levels. Thus, it touched intraday high and low of ~71,862 and ~71,303.97, respectively. BSE Sensex finally ended the day lower, losing ~536 points, or ~0.75% to sit at 71,356.60 levels.
Nifty 50 opened the day at ~21,661.10 levels and touched high and low of ~21,677 and ~21,500.35, respectively. It finally got settled at ~21,517.35, exhibiting a decline of ~148 points, or ~0.69%.
Readers will be surprised to know that this momentum was NOT seen in other indices. As geopolitical worries impacted Indian equities, mid and small-cap indices closed higher, surpassing the performance of frontline benchmark indices.
BSE Midcap index ended after seeing an increase of ~0.20% to sit at ~37,081.58 levels, with BSE Smallcap index closing in the gains of ~0.30% at ~43,103.61.
There is a great news for the Adani group investors. Conglomerate’s stocks dominated the investors’ minds as Supreme Court dismissed to allow the probe by special investigation team regarding the allegations against the company after the report by Hindenburg Research.
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