Sensex 56000: The market is now heading for caution

The year 2021 has proved to be a record year for the Indian stock market. Since the beginning of the year, it has received a return of 7.5 per cent. The Sensex has touched a significant level of 5,000 in the past week, following a steady rally in the market after hitting a low of 30,000 in January. Since the market plunged to the bottom when the epidemic began in March 2020, it has risen sharply by 114 per cent so far. However, market analysts believe that investors should be cautious in the market in the wake of this uptick.

In the last one and a half years (since March 30), investors have been blindsided by the fact that most of the portfolios in the market have returned between 50 and 150 per cent. In fact, it is time to reshuffle the portfolio according to market trends. Investors should evaluate the stocks in their portfolio and change them to include stocks that boost returns.

One thing investors should keep in mind is that returns in equities are never easy. Equity investing is a challenging matter as it is affected by all kinds of favorable / unfavorable factors. Market players focus on individual companies rather than sectors. In the pharma sector, for example, companies involved in gastro and respiratory systems have seen higher returns. While companies with different product portfolios are under price pressure. Thus, the trend of returns in the same area is seen differently.

Small-midcap stocks have seen sharp selling pressure in the recent past after a tumultuous rally. The process also saw the impact of additional surveillance measures by the BSE. The sector's index has also seen a slowdown after higher returns.

Along with various factors, government policy decisions also have an impact on the market. The recent decision by the government to repeal the restoration tax has created an atmosphere of trust between the government and the industry. Apart from this, after this step of the government, there will be a positive trend on the FDI front as well.

With all these issues in mind, investors should always keep in mind that the market does not get the same return every year. Equity investing is a challenging affair. That is why portfolio reshuffling is required according to market trends. Which can lead to a fair return with improvements.