1.) Reason Behind this Meteoric Rise
The government’s decision to cut its planned market borrowing amount for the current fiscal gave a boost to investor sentiment on Dalal Street on Wednesday. This took the Sensex above the psychologically important 35k mark for the first time in its history with the benchmark closing at 35,082 — up 311 points.
The rise of the Sensex to Mount 35k was also driven largely by domestic institutional investors, especially equity mutual funds (MFs). Mid-cap and small-cap stocks played a bigger role in the relentless rise of the markets than their large-cap peers.
2.) Sectors that rallied
Banking stocks extended gains with the Bank Nifty rising 1.7 per cent. Banking sector stocks gained after the government on Wednesday cut its additional market borrowing requirement by more than half for the current fiscal year to Rs. 20,000 crores.
Consistent buying in IT & pharma stocks alongwith FMCG, lent the required support.
3.) Specific Shares that rose the most
Biggest outperformers were SBI, ICICI Bank, HDFC Bank, Axis Bank, Yes Bank, Infosys & Larsen & Toubro. In 17 sessions alone, shares like Jindal Steel & Power Ltd., Phillips Carbon, Aban Offshore, etc. saw an upswing of upto 40%.
4.) Is it here to Stay ?
Many brokerages expect the Sensex and Nifty to give good returns in 2018. Expecting an earnings growth of 21.5 per cent next fiscal year, domestic stock brokerage HDFC Securities has set its Nifty target at 11,800 for fiscal year 2019.
However, one should exercise caution with respect to individual stocks. Risk-reward ratio looks more favorable for large-cap or fundamentally strong stocks. If you are already invested, you may choose to stay invested but buying more at this point may not be the best move.
5.) Should you book your profits at this level ?
The BSE mid-cap and small-cap indices have surged 42% and 54.5% respectively in the last one year and can probably be termed overvalued. Thus, you should look at reducing your small-cap & mid-cap exposure at these levels. You should continue your existing SIPs to have solid returns in the long term.