Celebrate Sensex at 60k, but don't get swayed by the rallying equities

Equity market has breached the psychological mark on Friday last by touching the magical mark of 60,000, but there is not much to worry about for the future as volatility apart we are likely to have Sensex roaming around this level only in the near future.

Anyway, it is also time to be cautious while putting your money where the mouth was. Please remember, all that glitters, is not gold.

Of course, the feat was driven by large caps with many index heavyweights touching new highs. The achievement assumes significance as it has defied the global cues in forms like crisis of China's Evergrande and the tightening of US monetary policy.

Now, there lies a word of caution. Elevated valuations are making a section of the market uneasy. Though, that may not be the true. The rationale is that even at this elevated level, the Sensex valuation is lower than it was at 50,000 level. At the moment, the Sensex is trading at a PE ratio of 25.8 times from 25.58 times when the index had first marched past 50k early this year.

Let us also have a look at fixed income returns, which are passing through bleakest phase these days. Similar is the case with gold which has also come down like anything as an asset class. So, as a smart investor, one should not get swayed by the rallying equities and avoid haste in redeeming their investments in these financial assets. Showing this kind of financial behaviour is a must so as to remain strong even if equities reverse.

Again, compared to global indices, Sensex is the most expensive after Nasdaq of the US. There are more concerns which one needs to keep in mind. October month might be important to watch for as RBI's MPC meeting will be a key driver where governor's speech will be important to watch for. Yes, October policy review may keep mum on rate hike, but it may give an indication of the rate hike in future.

Secondly, the corporates have been showing good financial results for two quarters in a row. Now, it has to be watched if the same momentum of the stock market's retail investors continues in future too so as to keep the celebration mood agog.

The Biden government in the US is likely to release some important economic numbers in the near future and that are all set to have their impact on the financial markets across the world, including India.

Whatever be the case, the pre-budget consultations have begun. In the equity market if the government takes a note of the areas of concern from various sections of the financial markets in the country and takes appropriate measures to address them in the forthcoming annual budget, then we have reason enough to keep enjoying the extended period of fireworks at the equity market as a precursor of Diwali, the festival of light.