The stock market benchmark Sensex reached an all-time high as it breached the 63000 mark, thanks to profits from banking and financial stocks and more recently Reliance Industries. Nifty50 is just 21 points short of reaching its all-time high of 18,887 in December 2022. In today’s trading session, the Sensex, as well as the Nifty Midcap and Nifty Small cap indices, all reached record highs.
Following a challenging beginning to the year, the Indian markets have displayed a remarkable recovery since April, delivering positive returns for three consecutive months, including the ongoing month of June.
The recent surge in the Indian markets can be attributed to several factors, including a temporary halt in rate hikes, a gradual moderation of inflation, overall improvements in the macroeconomic conditions, and satisfactory earnings reports for the March quarter. Nonetheless, industry experts caution that if global rate hikes resume or if inflationary pressures intensify, it could potentially disrupt the current market rally.
This has also given way to investors asking if they must now stop their systematic investment plans (SIPs) midway and opt for a renewed asset allocation based on the probability of short-term returns. No doubt, indices are nearing their high, which again creates the fear of a recurring and short-term bear phase before the market again braces for the possibility of a bull run in the coming months.
A tête with personal finance experts reveals why it may not be a smart idea to stop SIPs now. Apart, they warn investors against profit booking at this stage, explaining why we may be just in the mid of this really long bull rally and not at the end.
Dev Ashish, a SEBI-registered investment advisor and Founder - Stable Investor, said, “The markets have had a good run in the last few months and are closing in towards fresh all-time highs. And while nobody wants to leave the party when it’s on, it is always good to take a step back and review what is happening. Generally, investors should rebalance their portfolios at least once a year. But when markets have been in a good mood in the recent past, it might be a good time to rebalance the long-term portfolios once again to bring in a sanity check. If your goal was a short-term goal with some equity component, then the recent run-up gives you a good opportunity to book and lock profits and reduce the equity allocation of your short-term portfolio.”
Viral Bhatt, Founder, Money Mantra explained, “I don't think investors should opt for profit booking and cease to invest in funds through SIPs just because the market has been on a bull run for the past three months. These reasons include:
- The market is cyclical and there will always be ups and downs. Just because the market is doing well now doesn't mean it will continue to do so forever.
- SIPs are a long-term investment strategy and are designed to ride out market volatility. By investing through SIPs, you are essentially averaging your cost of investment, which can help you protect your capital in the event of a market downturn.
- The current bull run is still relatively young and there is still a lot of potential for growth in the market. By continuing to invest through SIPs, you could potentially lock in some of these gains.”
Basavaraj Tonagatti, a certified financial planner and SEBI-registered investment advisor shared, “If you examine the past Nifty or Sensex movement, market all-time highs are frequent occurrences. Therefore, I strongly advise you to reevaluate your asset allocation rather than panicking and making snap judgments. You can rebalance it to return to the specified asset allocation if it has significantly veered toward equities between five per cent and 10 per cent. I would not strongly advise quitting the SIPs. I don't believe we should stop SIPs or worry too much about such all-time highs if you are a long-term investor and did the right asset allocation.”
Rishabh Parakh, Chief Play Officer, NRP Capitals elucidated, “Profit booking only if you need money to put it to better use or have achieved your targets but profit booking to reinvest when the market corrects is a wrong idea. Sell those which are dud stocks and reinvest in better ones but ultimately it’s a catch-22 question. You must look at your goals and target and decide.”
You must put your money in the market only when you harbour a long-term perspective. Investing money and then taking out your money every few months for fear of losses will impede your way to wealth creation. Compounding wealth is only possible when you let the money stay in the market and continue to earn returns over it. A long investment tenure is an essential element to witness and experience the magic of compounding that only a few follow and ardently stick to for better returns.