Sensex at 31,000 and Nifty at 9,600, should you invest now?

BSE building. Photo: IANS

Despite disappointed GDP (Gross Domestic Product) numbers, domestic markets on Thursday were hardly impacted and traded flat during intraday.

BSE Sensex ended at 31,137.59, down 8.21 points or 0.03%, while NSE Nifty ended at 9,616.10, down 5.15 points or 0.05%.

On Wednesday Ministry of Statistics & Programme Implementation released India's GDP numbers for the quarter January-March 12017. It said that India's GDP for the fourth quarter stood at 6.1%, missing estimates. In the previous quarter, GDP was at 7%, in second quarter stood at 7.4%, 7.2% in the first quarter of last fiscal.

Real GDP or GDP at constant (2011-12) prices for the year 2016-17 was at Rs 121.90 lakh crore showing a growth rate of 7.1% over the year 2015-16 of Rs 113.81 lakh crore.

ALSO READ: India's GDP growth in the fourth quarter drops to 6.1%; clocked 8% in 2015-16

Coming back to the equities, at 31,000-mark and at 9,600-mark, the markets are at all-time high. Generally, entering the market at high levels is not advised. But this time the situation likely to be different simply because of positive economic outlook.

So, if you are thinking to enter the market, then here's your answer.

Speaking with Zeebiz, Vinod Nair, Head of Research, Geojit Financial Services Ltd, said that Sensex is currently trading at a premium valuation of 1Yr fwd P/E of 18x. This premium is largely due to high expectation of revival in earnings growth in FY18, by more than 20% compared to muted FY17.

If the quarterly trend of business growth is maintained as seen in Q4FY17, valuation will remain at a high range supported by strong liquidity from mutual funds and FIIs.

"This is envisaged that strong fundamentals of domestic economy led by reforms, good monsoon, government spending and implementation of GST will expand GDP growth in the future. Hence we suggest to maintain a positive view in the long-term and increase exposure assuming small consolidation," Nair said.

Further, now the question is where to invest?

Even though experts have a cautious view over the near-term they continue to believe that equity is the space to outperform over the long to medium term.

"We advise investors to use every dips as an opportunity to increase/maintain its investment in equity market. The sectors on which investors can focus on are: Infrastructure like EPCs and Cements," Nair said.

In spite of high valuation in cement, the outlook is positive due to improvement in capacity utilisation which will cut the demand-supply gap. Other sector to be positive on are consumer durables and discretionary due to a better economy, monsoon and GST. Defence will be all time beneficiary due to government reforms and restructuring in business model.

On a contrarian view, two sectors which can be considered in the medium term are IT and PSUBs.

"IT, due to its better outlook on account of emerging opportunities in digital business and cheap valuation. Government’s focus on strengthening the PSU banks through mergers and meeting the capital adequacy with improves the business outlook in the medium-term," he added.

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