Nifty, Sensex rally 25% in Samvat 2080 on macro trends: What should be your trading strategy for Samvat 2081?

In Samvat 2080, the Indian market witnessed a sharp rally driven by robust macroeconomic fundamentals and foreign fund inflows, which supported investor sentiment. The Nifty 50 index surpassed the 26,250 mark, and the 30-share BSE Sensex topped 85,900 in September 2024, with both indexes gaining around 25 per cent during Samvat 2080. BSE midcap and smallcap indexes outperformed and gained 45 per cent and 50 per cent, respectively. 

Corporate earnings growth momentum, strong GST collection, capex cycle revival, favourable monsoon, and robust domestic demand were among the driving factors, while positive global clues, along with strong liquidity through mutual funds, remained supportive factors for the market. 

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While domestic benchmark Nifty 50 has risen by approximately 25 per cent since last year's Diwali, the global market, particularly major US indices, has also increased around 27 per cent-35 per cent during this period. 

Outlook for FY25

The recent volatility in crude oil prices and geopolitical conflicts are potential near-term uncertainties for overall economic growth. D-Street analysts expect a real GDP growth rate of 6.9 per cent in FY25E and 6.5 per cent in FY26E, factoring in continued government capex, improvement in the global situation and gradual improvement in consumption.

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“Post-decent 19.8 per cent earnings growth in FY24, we expect net profits of the Nifty-50 index to grow by 6.7 per cent (EPS of 1,042) in FY25 and by 17.3 per cent (EPS of 1l222) in FY26. At 24,700, Nifty trades at 23.7x FY25E and at 20.2x FY26E. FY25 will likely see more broad-based growth across sectors,” said domestic brokerage Kotak Securities.

D-Street experts have recommended stocks that can be accumulated for the medium to long term, both from fundamental and technical perspectives. Analysts add that there might be some selling pressure and volatility in the Indian markets due to global and domestic concerns. Tech Mahindra, Vedanta, ITC Ltd, Antony Waste Handling, and Varun Beverages Ltd, among others, are some of the top Diwali stock picks for Sanvat 2081.

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Samvat 2081: What should be your trading strategy?

The journey of Samvat 2080 to 2081 was a landmark one for the Indian stock markets. Equities, gold, and bonds all did well, creating much wealth. “The biggest learning from Samvat was not to underestimate the upside potential in a bull market. Everyone who booked small profits in equities could never enter again,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.

"On the flip side, a significant misstep was over-allocating to high-risk equities, especially during periods of market euphoria. The resulting drawdowns emphasized the importance of systematic buying and portfolio rebalancing from time to time," added Goel.

Understanding the impact of global and Indian macroeconomic factors, like slowing economic momentum, the trajectory of corporate earnings, and US and Chinese economic and policy trends, is key to determining one's trading strategy. 

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According to Amit Goel, diversification across asset classes can mitigate risk. A well-structured asset allocation strategy is crucial, especially during uncertain times. Even if a particular sector looks very attractive, a diversified equity portfolio performs better in the long run, even if it underperforms in the short term.

Investment experts also believe Diwali is an ideal time to reflect on one's financial goals and consider investing in Systematic Investment Plans (SIPs). Particularly in small-cap and mid-cap mutual funds, SIPs can help build significant wealth over the long term if one is prepared to embrace some risk.

“Starting early in your career gives you the advantage of time. By consistently allocating 20-25 per cent of your monthly income into SIPs, you can tap into the growth potential of small and mid-cap funds, historically offering a CAGR of 15-18 per cent,” said Swapnil Aggarwal, Director, VSRK Capital.

Also Read: Stock market today: Nifty 50, Sensex end range-bound trade marginally lower; FMCG, realty suffer

This disciplined approach can lead to substantial wealth accumulation over a span of 10, 15, or even 20 years. Although small-cap investments are riskier, they present immense potential for long-term wealth creation. While inherently riskier, the small-cap and mid-cap sectors are well-suited for long-term investors looking to generate significant returns. 

“These funds are expected to outperform others in the coming decade, making them attractive for those with a higher risk tolerance. They can be powerful vehicles for achieving long-term financial goals, such as retirement or other major life milestones,” said Swapnil Aggarwal, Director, VSRK Capital.

"However, while focusing on high-growth small-cap funds, it’s wise to maintain a diversified portfolio that includes large-cap and mid-cap funds. This strategy can help balance your risk profile, ensuring stability and minimizing potential losses during market downturns. When selecting mutual funds, prioritize those with a proven track record of consistent performance over 5-10 years and look for options with low expense ratios to maximize your returns," added Aggarwal.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.