Covid trigger for BSE Sensex’s biggest bull run

In a perverse kind of way, the Coronavirus pandemic may be the best thing that happened to the Indian stock markets leading to one of the biggest bull runs in recent history with the BSE Sensex scaling 50,000 points mark and doubling from the lows just a few months back in March of 2020.

As convoluted as it sounds but the BSE Sensex has created one of the biggest wealth creation in history for institutional and retail investors within months because of the low created by the coronavirus pandemic.

And at a time when unemployment was at a high during the pandemic and small businesses were struggling, stock market upmove may have been the lifeboat of millions as record first time investors entered the stock market.

More than any other event in recent history, it is the pandemic which has fuelled the longest winning streak for the Sensex to touch the golden 50,000-mark, doubling after March last year.

The gain of the last 5000 points came in just 32 trading sessions. Deepak Jasani, Head of Retail Research, HDFC Securities said, “It is a momentous day for India’s capital markets as the Sensex touched 50,000 on Jan 21. The gain of last 5,000 points has come in just 32 trading sessions. Expectations of turnaround in the economy post Covid vaccinations and continued FPI inflows have led to this kind of gains for Indian markets in a globally low interest scenario. Post the Forthcoming Union Budget we may witness a temporary brake to the uptrend and further upmoves from hereon will depend on the pace of economic and corporate earnings growth and the trajectory of inflation and interest rates in India and the world.”

Joseph Thomas, Head Of Research , Emkay Wealth Management said the valuations look stretched now. “The liquidity expansion by the central bank and the ample FII driven liquidity, a V-shaped recovery of growth aided by the discovery of vaccine, and most recently the change of guard in US have been some of the factors propelling markets higher and higher. As the Sensex crosses the 50,000, the valuations do look stretched. The valuations are a function of earnings and earnings not coming through remains the key risk at the current juncture.”

S. Ranganathan, Head of Research at LKP Securities said, “While global liquidity has been the primary driver of equity markets in 2020, the 50K milestone on the Sensex today clearly reflects the changing face of New India as the reform push together with the pent-up demand post lockdown is getting reflected into earnings of India Inc. proving the prognosis of pessimists wrong. Going forward the recognition of equities as a viable asset class to compound wealth would ensure that domestic money waiting on the sidelines would step in during corrections”.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services said the markets are overvalued now. “Markets are barometers of the economy with a potential to discount the future. If this is true, the Indian economy is on a strong recovery path. If the recovery in growth and corporate earnings, currently underway in India, gathers momentum, the markets may further surprise on the upside. But it is important to appreciate that the market is overvalued from the short- term perspective. At high levels, the market is vulnerable to a correction. Investors can utilize the current euphoria to get rid of low-grade stocks from the portfolio,” he said.