Rising market tide lifts all boats: 95% of stocks have gained since May 18

The latest bullish spell in the market has benefited the entire market — a deviation from previous occasions when the rally had been driven by select blue-chips.

Over 95 per cent of the BSE 500 components have recorded positive gains since May 18, when the latest move upwards began. Stocks in the BSE 500 universe account for nearly 93 per cent of India’s market capitalisation. If one looks at the entire listed universe, an overwhelming 82 per cent of the 2,500 stocks traded on the BSE would still have made positive strides in the past three weeks.

The Sensex and Nifty, as well as the broader-market focused BSE 500 index, have each climbed more than 14 per cent since May 18. The surge in the market has been marked by aggressive buying by overseas funds, amid optimism regarding the reopening of the economy and aggressive stimulus measures announced by global authorities. Most global markets, too, have posted strong gains.

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“Monetary policies globally have remained expansionary, which is supportive for risk assets. The US Fed is ramping up asset purchases, and though the Fed has ruled out negative interest rates, real US rates have nevertheless turned negative. Similarly, UK sovereign yields indicate negative interest rates coming soon. The BoJ and ECB will also persist with balance sheet expansion,” says Amar Ambani, senior president and institutional research head, YES Securities.

Market experts say the positive momentum in the market has encouraged investors to look beyond large-caps, where the risk-reward is more favourable due to the multi-year low valuations.

“Despite not-so-encouraging economic and micro news, stocks have risen from the lows on account of bottom-fishing, attractive valuations and hopes that the Covid-related impact will soon wither away and companies will be back on an earnings growth path,” says Deepak Jasani, head (retail research), HDFC Securities.

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More than half the BSE 500 stocks have outperformed the benchmark indices since three weeks. Nearly 70 stocks have posted over 30 per cent gains, while a dozen have soared above 50 per cent.

So, is it a good time for those sitting on the sidelines to enter the markets? Experts say one has to be cautious.

“While it is a good opportunity, caution is advised. We recommend maintaining adequate liquidity of at least 25 per cent at individual portfolio levels, and to invest in a staggered and systematic way without leverage and with enough diversification across sectors,” says Palka Chopra, senior vice-president, Master Capital Services.

Those who are adequately invested should consider taking some money off the table, feel some experts.

“If investors are fully invested in equities as per their asset allocation plan, it may be time to reduce their equity allocation on rises, to create liquidity and take advantage of the expected dip. But if they are under-invested in equities, it is a good time to start staggered buying in select stocks or MF schemes over the next 5-8 months,” says Jasani.