Markets near record high! Experts suggest key sectors to watch in this bull run: Prefer IT and banks

Benchmark indices Sensex and Nifty hit new highs in the previous session on September 24. However, as of September 25, trading remains subdued, with muted movement across the markets.

On September 24, Benchmark Sensex reached a record high of 85,163.23, crossing the 85,000 mark for the first time, while Nifty set a new high of 26,011.55, breaching the 26,000 level.

Amit Goel, Co-Founder and Chief Global Strategist of Pace 360 believes that we appear to be in the late stages of a bull cycle in the current market environment. While the market has shown significant upward momentum, late bull cycles are often characterized by overvaluation, as evidenced by elevated Price-to-Earnings (P/E) ratios and heightened market sentiment. These indicators suggest that a more cautious approach may be prudent.

Vishnu Kant Upadhyay, AVP, Research and Advisory at Master Capital Services, attributes this year's nearly 18-19 per cent gains to bullish momentum driven by the BJP's third consecutive election victory and the U.S. Federal Reserve’s decision to cut interest rates by 50 basis points.

"The Indian equity indices, Nifty50 and Sensex, have witnessed a strong bullish momentum, with gains of nearly 18-19% year-to-date. A significant catalyst for this upward trajectory has been the BJP-led NDA's victory in the 2024 general elections, securing a third consecutive term. More recently, the U.S. Federal Reserve's (FOMC) decision to implement a substantial rate cut of 50 basis points, bringing rates to the 4.75%-5.00% range, has further bolstered risk assets globally. In response, the Sensex breached the critical psychological level of 85,000, while the Nifty50 approached the 26,000 mark," said Upadhyay of Master Capital Services.

The recent surge in Indian markets has prompted investors to reassess their strategies and focus on sectors with promising growth potential.

In the near term, Goel anticipates potential corrections, as economic cycles tend to be cyclical. Investors should be prepared for a pullback, which could present opportunities to invest in fundamentally strong companies at more attractive valuations. A bear market may precede the next growth phase, laying the foundation for a more sustainable upward trajectory.

Amid this market scenario, let's see which sectors experts advise investing in.

Ajit Mishra, SVP of Research at Religare Broking Ltd, advises investors to adopt a long-term perspective while navigating this bullish phase. According to Mishra, the banking and IT sectors stand out for their strong growth triggers and attractive valuations, even after the recent rally. These sectors continue to offer earnings visibility, making them appealing to long-term investors. Selective opportunities can also be found in industries with similar earnings potential. He suggests that investors remain discerning, focusing on companies with robust fundamentals that can withstand market volatility.

Upadhyay also emphasizes the strength of the banking and IT sectors, noting that they have been key beneficiaries following the recent decision by the U.S. Federal Reserve to cut interest rates by 50 basis points. This decision has significantly boosted risk assets globally, with the Indian market rallying in response. The Sensex breached the psychological level of 85,000, while the Nifty50 approached the 26,000 mark, further cementing the bullish sentiment in these key sectors.

While the elevated valuations may raise concerns, Upadhyay believes the Indian equity market remains attractive. The combination of political stability, a favourable global rate environment, and consistent domestic inflows positions the market for continued strength in the near term.

In light of the recent market scenario, both Mishra and Upadhyay recommend that investors adopt a long-term outlook while selectively identifying sectors with growth potential. Banking and IT remain strong candidates due to their earnings visibility and growth triggers, but discerning investors should also look for opportunities in other sectors that exhibit similar resilience. Despite elevated valuations, the Indian equity market continues to offer attractive investment opportunities, supported by political stability and favourable global economic conditions.

Investors should stay vigilant, balancing their portfolios across sectors that combine growth potential with solid fundamentals to navigate the evolving market landscape.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.