oppn parties Sensex At 50K: Is A Huge Correction In The Offing?

News Snippets

  • Calcutta HC says Cricket Association of Bengal is not liable to pay tax on advertisement inisde Eden Gardens cricket ground as it is not a 'public place' because it does not have unrestricted access for the general public
  • Supreme Court admits a plea from a child of a single OBC mother who had applied for an OBC certificate for her son
  • Supreme Court approves applying strict preventive detention laws for 'cybercriminals'
  • SBI likely to shift part of operations of its Global Market Unit from Kolkata to Mumbai
  • FM nirmala Sitharaman calls for a "structured, process-driven approach to compliance" and asks top I-T officials to speed up refunds and simplify processes
  • Marine insurance costs surge as the oil corridor in Strait of Homruz becomes risky due to war
  • Stocks weaken on Monday on global cues: sensex sheds 511 points to 81896 and Nifty 140 points to 24971
  • Former left-arm spinner Dilip Doshi dies in London at 77. He played for India in 33 Test matches and for Bengal in domestic tournaments
  • Pant becomes the only keeper to score two centuries in the same Test in England
  • England Test: Rishabh Pant hits his second ton and KL Rahul a classy century to put India on top, England need 350 runs on the last day, with the ptich showing signs of wear and tear
  • DGCA orders an audit of the entire aviation ecosystem in the wake of recent snags in many flights after the AI Dreamliner crash in Ahmedabad
  • 2 Pahalgam residents arrested by NIA for sheltering and aiding 3 terrorists who killed civilian tourists in pahalgam tell the agency that there were 3 LeT ultras from Pakistan that carried out the attack
  • India unlikely to agree to US demands for lower tariffs on agri products and GM food, trade deal faces fresh hurdles
  • Stocks likely to plummet today as traders will be worried about the effect of US strike on iran, oil price rise and possible inflation. Foreign funds may also withdraw in the volatile global situation
  • Oil prices likely to shoot up as US strikes at iran and the latter decides to close the Strait of Homruz
US President Donald Trump unilaterally announces a 'ceasefire' between Israel & Iran
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Sensex At 50K: Is A Huge Correction In The Offing?

By Ashwini Agarwal
First publised on 2021-01-22 07:40:45

The stock markets are on fire. The Sensex has climbed mount 50K. With massive foreign funds flow and excess liquidity in the domestic financial market, financial assets have become excessively overpriced. There is bound to be a correction as even the RBI governor has recently warned that financial assets, especially some stocks, are trading at unrealistic prices. He warned the public to make considered decision in buying such assets at this time.

Will this rally or bull phase sustain? Or will the bubble burst soon? Is it a good thing to have buoyant markets with a bull phase?

There are no easy answers to these questions. If one goes solely by fundamentals, there is a strong case for a correction happening. The P/E ratio is loaded against investors who have to invest Rs 34.42 to earn Re 1 from stocks. Companies are overvalued as the book value to price ratio is 3.39. These are pointers that operators have taken long positions and the market is bound to see a correction. This is also true because the RBI has indicated that it will systematically reduce the liquidity in the financial system.

But at the same time, buoyancy in the market is helping IPOs as retail investors are lining up to buy new offerings. All IPOs recently have been oversubscribed heavily and their opening prices have further fuelled investor interest. The despondency of 10 months ago seems to have vanished and money is there for good projects backed by strong entrepreneurs.

But in these exuberating times, those retail investors who do not informed decisions are likely to burn their fingers. When markets are rising, everyone is overpowered by greed. A lot of misinformation is also spread and rumours abound. Hence, small investors would be advised to book profits wherever possible and wait for a correction before taking new positions.