Sensex at 50K presents an opportunity for investors

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The benchmark Sensex at the BSE breached the 50,000 mark on Thursday (January 21) taking cues from the US markets following the swearing-in of Joe Biden as the 46th President of the United States.

Globally We would return to pre-Covid GDP

As Biden addressed his fellow Americans and the world and called for a United America, promised them hope and growth, and offered to improve ties with countries around the world, the Dow Jones rose to close at a new high of 31,188 on Wednesday.

The Indian markets too picked the optimism, and breached the 50,000 mark in the early trading hours on Thursday.

Why the rise?

The current rise is primarily on account of stability in US politics and a smooth transition of power after the siege at Capitol Hill on January 6.

As Biden offered hope and promised to take all Americans along, and also told hinted at improving relations with the world, there is a sense among market participants that there could be an improvement in the geopolitical environment and trade relations. This lifted market sentiments to touch new highs.

This has come on top of the Biden’s proposed stimulus of $1.9 trillion, which is likely to keep the markets at elevated levels for now.

Will the markets continue to rise?

As of now, that indeed looks to be the case. Except for some dips in the interim, the markets are likely to remain at elevated levels, and rise further. There are several reasons that back this possibility.

If change of hands in US politics is more comforting for markets for various reasons, the expectation of additional stimulus and some of it finding its way into Indian equity markets would be another key factor.

Besides, the fact that the Covid-19 cases are on the decline in India and the vaccination programme has begun, provides further hope to the economy. Many feel that the pace of vaccination will provide much needed confidence to the economy, and will define the pace of the economic recovery.

The forthcoming Budget, just 10 days away from now, will also prove to be critical for the markets, as it may showcase the government’s agenda for Sensex growth of the economy going forward.

The Indian markets have been rising ever since the country relaxed lockdown measures in June-July — it has, in fact, risen by nearly 70 per cent since April 1, 2020.

To a large extent, this rally has been driven by the huge liquidity in global markets, a part of which has found its way into the Indian markets too. Since April 1, foreign portfolio investors have pumped in a record Rs 2.38 lakh crore into Indian equities.

Sensex and Nifty 50 were trading firm on Wednesday