Trade at a premium of 65-70% in Indian markets compared to emerging markets

- October likely to be the month of correction after a recent rally in the market

Indian stock markets, which plunged to the bottom in March 2020 due to the Corona epidemic, have seen a surge in growth over the past year and a half. In the eight months since the Sensex jumped to 30,000 in January this year, the Sensex has risen more than 2,000 points to a record high of 5,000 points. Given the market trend, it is likely to jump to 30,000 in September alone.

Due to various favorable factors, the Sensex has so far risen more than 11,800 points (3.50 per cent) this year. As a result, the valuation of companies listed on the Bombay Stock Exchange has also risen to ટો 2.3 trillion, making it the sixth largest market capitalization market in the world.

The reasons behind this historic rally in the Indian stock market include epidemic control, rapid vaccination operations, slow but steady growth in the economy, normal liquidity situation in the markets, decision by the Federal Reserve to continue stimulus, low interest rates and a series of measures by the government and the Reserve Bank.

Given the current various factors and market trends, the Sensex will jump above 30,000 this month. Market analysts believe that by 205, it will double. Due to various stimulus factors, the Indian market has emerged as a first-rate bullish market and is likely to continue to do so in the near future. However, in the meantime, the stages of correction will continue to come.

At present, Indian markets are trading at a premium of 10 to 15 per cent in terms of price-to-earnings valuation. While compared to other emerging markets, they are trading at a 5-20 per cent premium. Various government policies, corporate earning growth and low bond yields have pushed up the valuation of Indian markets. Under these circumstances, a return of 15 to 18 per cent on equity can be obtained on an annual basis. However, market analysts believe that the return on equity may decline if the market is overvalued from the current level.

Given the current market trend and high valuations, the focus should now be on asset allocation and portfolio levels on an individual basis. However, investors should stay away from new purchases at the current high level in the market. The market has seen a steady rally recently. Due to which there is a full possibility of correction in the near future. Even so, considering the past trend, October is considered as the 'month of correction' for the market. Thus, it is imperative to adopt a cautious attitude in the high head market.