Sensex, Nifty Hit New Highs

NIFTY 50 reached an all time high on April 16, 2019 at 11787.15 and Sensex reached 39,275.64. This is because of various factors like near normal monsoon predicted by the weather department in 2019, positive inflows from foreign institutional investors, probable rate cut by RBI in June and expectations of a stable government after the election results in May. There are other factors like easing US- China tensions and good headline numbers expected for companies in FY20. It is expected that the rally in Indian stocks and the indices would continue and is expected to touch 12,000 (NIFTY) in April series.

The effects of all developments in the economy get factored in the movement of market stocks and indices. Indian agriculture is highly dependent on monsoon and hence a forecast of a normal monsoon would mean boosting of rural demand which is good for consumer durables and two-wheeler industry. Similarly, developments on interest rate cuts, would boost the sector which are dependent on external capital (debt would become cheaper). Strong FII inflows are good for companies in capital intensive industries like infrastructure and power. A stable government and easing US- China tensions, improve the market sentiment in general.

It is the right time for people sell the stocks, since the markets are at record highs. A good time to invest in markets when the markets are not doing well. At that time, once should spot stocks with good fundamentals, which is undergoing market correction. Another way of finding good stocks is to look into industries that are doing well or are expected to do well in future. We can choose large companies if we are looking for stable and medium returns with low risk. Small and medium size companies have a stronger projected growth trajectory. If you are looking for return which is more than that of economy, one should go for small and medium companies which are poised to grow. There are however larger risks involved than a large company. This is since smaller companies generally do not have sufficient capital and resources to face obstacles like market swings, changes in government regulations, etc.