NEW DELHI: A famous dialogue by Emperor Akbar in the cult movie Mughal-e-Azam goes like this: Agar aisa na hua to Salim tujhe marne nahin dega aur hum, Anarkali tujhe jeene nahin denge. (If things dont work out like this, Salim wont let you die and Anarkali, I wont you let you live.)
This simile drawn by market veteran Nilesh Shah aptly sums up the current status of the domestic equity market. In an interview with Economic Times earlier this week, Shah compared the market to Anarkali, whose upside could be capped by Akbar, in the form of higher oil prices, valuation concerns, further acceleration in tariff war and political uncertainty.
On the other hand, Salim in the form of good monsoon, strong domestic flows and improving corporate performance should protect the downside, he said.
“Our Anarkali market is stuck between Akbar and Salim,” Shah told ET.
While the benchmark stock indices (Anarkali) have been hitting fresh highs every day this week, analysts say there are a few factors (Salim) that may restrict the market from falling while others (Akbar) could continue to cap the upside.
The BSE Sensex has wiped out all the losses it had suffered since January 29 and topped the 37,000 mark for the first time on Thursday. The 30-pack traded above 37,300 on Friday morning, while NSEs Nifty50 crossed past the 11,200 mark for the first time ever.
But not every investor will make money in this rally. Because stocks and sectors that led the last bull phase are changing, and that will leave some investors lagging behind.
Sensex is up 8 per cent year-to-date, even though foreign flows have been negative on a net basis. The run so far has mainly been powered by strong domestic flows, which have been growing stronger each day and have become big enough to cushion any downturn triggered by FII outflow. This has, in a way, largely insulated the domestic market from external shocks.
Eventually, the market may hit many new highs in this phase of the bull run, analysts say.
They say there has been a shift in focus from smallcaps and midcaps as the churn in sectoral allocation continues following the recent correction. They expect the indices to see more upside in the next couple of years, but advised investors to remain mindful of portfolio churning that is taking place.
It is going to be a three-year kind of bull market, says Atul Suri, Marathon Trends-PMS, who believes the indices will see many more lifetime highs in the days ahead.
“Remember, Nifty cannot be positive every week, every day. We will have corrections. We had about 10 per cent correction on the benchmark index, 20-30 per cent in midcaps and smallcaps. It is a part of the journey. The critical point will be the churn. Portfolios are not going to reflect new highs. The reason is, in every correction, investors have to churn and new sectors or new multi-year themes will come into play,” Suri told ETNow.
Suri said the indices will make new highs, but most investors will actually fall behind.
“We are seeing a very big churn from midcap and smallcaps to largecaps and you are seeing a churn towards consumption as a big theme, which will play out in the next year or so,” he said.
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