Sensex at record high but are investors really minting money now?

NEW DELHI: Foreign investors or FIIs are buying Indian stocks aggressively, taking domestic equity barometer Sensex to all-time record high levels, but the mood on Dalal Street is not as jubilant as many investor portfolios are still struggling for breath.

"Retail investors are not making money because the mid and smallcaps are down. This phase of the rally is led by frontline stocks where the bulk of FII dollars is flowing in. That is why even though the indices are rallying, investor portfolios are down," equity strategist Kranthi Bathini of Wealth Mills Securities said.

During the last one month, Nifty has returned 4.25% while Nifty Smallcap is flat and Nifty Midcap is up only 1.44%.

The ongoing rally in the market, which has taken the Sensex to record highs, is led by largecaps particularly in banking. IT majors, too, have been in demand in the last couple of days. NSDL data shows out of the total investment of Rs 28,888 crore between November 1-15, FIIs spent a bulk of Rs 11,452 crore in financial services alone. FIIs are also betting on FMCG, IT and auto stocks.

Analysts say a vast majority of retail investors, particularly newbies, have avoided largecaps believing they are high priced.

"In the ‘K’ shaped recovery happening in the Indian economy now, largecaps are doing well since they have the resources to withstand a tough business environment. Mid and smallcap companies are finding the going tough," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The current leg of the rally on Dalal Street is facilitated by a sharp correction in crude oil prices, declining bond yields, fall in the US dollar index and rally in the mother market US amid hopes of a Fed pivot.

“We anticipate further rise, with strength indicated by most of the major frontline stocks like HDFC twins, ICICI Bank, SBI, TCS, Infosys, M&M, L&T, Reliance and Bharti Aitel getting into a strong zone with much upside potential visible which can carry the Nifty index to new high and further upward with initial target of 19,500,” said Vaishali Parekh of Prabhudas Lilladher.

Earlier in the week, global brokerage firm Goldman Sachs had released a report saying that it expects Nifty to touch 20,500 by the end of 2023. Describing the Indian stock market as the most expensive in Asia and emerging markets, it said India’s 'superior' earnings growth appears to be priced in.

However, Bathini said the valuations are overall fairly valued given the growth visibility.

At 12-month forward PE of 19.7x, Nifty is 22% above its long-term average, with most sectors barring banks trading at higher valuations vs their long-term averages.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)