Sensex breaches 31,000: What should be the next move of investors?

BSE Sensex closed the week at an all-time of 31,028.21, on the same day when Modi-led government completed its three years in the office. NSE Nifty too followed the suit and closed at 9,595.10. In the last three years, the benchmark index has soared from 24,400 to 31,000 and delivered an absolute return of 27 per cent.

According to Vaibhav Agrawal, Head of Research and ARQ, Angel Broking, the continued MF and FII inflows in the Indian equities have taken the Indian equities to fresh highs. He says, "Coincidently this has come on the occasion of 3rd anniversary of the Modi government. This indicates that faith shown by investors in the government and its policies has been rewarded so far. While global economy remains in good shape, at the current juncture, we believe that domestic factors life GST, affordable housing, etc. are weighing more than the global factors. We continued to believe that Indian markets are likely to do well going ahead owing to the strong monsoon, reforms, low interest rates and strong consumption trends".

It is a known fact that investments into equities swell when the market is at its high and investments contract when market is at lows. Ideally, it should be vice-versa. Now, when the benchmark index has reached its life-time high, this creates a sense of excitement among investors. However, experts advise investors not to be swayed too much by the market movements.

Mihir Vora- Director and Chief Investment Officer, Max Life Insurance says, "The equity markets are being driven by strong liquidity flows and expectations of acceleration in economic activity post-monsoon. However, valuations are in the expensive zone, especially given the lack of earnings acceleration in the past quarters. We see markets consolidating at these levels.

Jatin Khemani, CFA, Founder & CEO of Stalwart Advisors, a SEBI Registered Independent Equity Research Firm based out of New Delhi too alerts investors of any near term volatility. "Even a bull market can have multiple 20 per cent  (approx) corrections from top, don't get scared and let your SIPs benefit from those corrections. Given the valuations are a bit stretched there could be some time correction in the short term. Also, it would be prudent to keep a realistic expectation in terms of returns."

Remain invested

Do not make any hasty decisions just on the basis of market movements. If your goal is far away, say five years or more, there is no need to move out of equity. Bhavana Acharya, Analyst, Mutual Fund Research, FundsIndia.com says, "Over the long term such as 6-8 years, equity delivers superior returns. At all times, make investments with the timeframe in mind and stick to it. Shifting around investments based on market movement will simply lead to needless and excessive churn in the portfolio"

You may sell If...

Cheers to investors whose goals are approaching. If your goal is one to two years away, you may start to redeem in tranches and freeze returns in the ongoing bull market.

Jatin of Stalwart Advisors recommends to redeem if you were invested in small and mid-caps. "If you were invested in some small-cap and mid-cap fund, you would have made some really good money and it may not be a bad idea to take some gains off the table and keep it in fixed income or deploy into large-cap or multi-cap funds. Otherwise let the money stay at work".

Also, this is right time to revisit your portfolio and check on the equity to debt allocation and rebalance if required. "Once a year, investors can run a check on the equity to debt allocation of the portfolio. If it is more than 5 percentage points away from the original allocation, bring the allocation back in line by booking some profits. For example, when a 75 to 25 per cent equity debt allocation moves to an 80 to 20 per cent allocation. This rebalancing will be enough to ensure that some profits are booked when it is necessary,

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