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

News Snippets

  • T20 WC: USA enter Super Eights as their last match against Ireland gets washed out. They were ahead of Pakistan in the points tally. Pakistan were eliminated
  • T20 WC: USA enter Super Eights as their last match against Ireland gets washed out. They were ahead of Pakistan in the points tally. Pakistan were eliminated
  • BJD leader and former Odisha CM Naveen Patnaik said that the criticism of his aide V K Pandian is "regrettable"
  • As more than 20 BJP ministers lost in the recent elections, the new Union cabinet will have many new faces from the party
  • Congress Working committee asks Rahul Gandhi to take up the position of Leader of Opposition in Lok Sabha. Gandhi says he will consider the request
  • RBI governor Shaktikanta Das said that gold was shifted to India as the quantum of RBI gold abroad had increased due to recent purchases
  • Delhi HC rules that submitting photographic evidence of adultery will not be enough, they will have to be proved as authentic in the age of deepfakes
  • A four-member panel will review NEET-UG results of 1563 candidates to check if they were given extra marks for exam time loss
  • Mamata Banerjee says her party will not join Modi's oath-taking ceremony. Also says INDIA bloc might stake claim to form government later
  • K C Tyagi of the JD(U) dropped a bombshell when he said that Nitish Kumar was offered the post of prime minister for switching sides. Opposition leaders rubbished the claim
  • This May was India's hottest month in 36 years says IMD
  • T20 WC: India take on Pakistan today. Telecast to begin at 8pm IST
  • T20 WC: Afghanistan stun New Zealand and Bangladesh win against Sri Lanka
  • T20 World Cup: Australia beat England by 36 runs. This spoils England's chances of making the playoffs as they have lost both their matches till now
  • Heat wave continues in the country as monsoon moves slow
G7 commits to promote India-Europe corridor
oppn parties
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.