Sensex at all-time high; key factors behind the stock market rally & what should mutual fund investors do?

Bulls on Dalal Street received a boost from renewed confidence regarding a potential Fed turn and strong global indications. On Thursday, the BSE barometer Sensex reached at all-time high of 62412.33 thanks to late-night buying in domestic markets.

The 30-pack index increased by nearly 900 points during the course of the day to close at a record high of 62,272.68, an increase of 762.10 points or 1.24%.

The NSE equivalent, the Nifty50, closed at 18,484.10, up 216.85 points or 1.19%. Earlier today, the index reached a fresh 52-week high of 18,529.70.

The market capitalization of all BSE-listed equities reached Rs 283.9 lakh crore today, making Dalal Street investors richer by Rs 2.46 lakh crore.

What are the main causes of today’s market rally?

The following are the main causes of today’s market rally:

Slowdown in Fed rate hikes

The Federal Reserve’s most recent meeting minutes revealed that even though they are unsure of how high the benchmark rate will rise, most policymakers anticipate a slower pace of interest rate increases. 

Smaller rate increases by the Fed, according to analysts, are advantageous for both risky assets like gold and safe-haven assets like stocks.

As investors analysed the most recent FOMC meeting minutes, which suggested that the rate hike cycle may be winding down, domestic indexes saw significant gains driven by widespread purchasing.

Firm global markets

In earlier Asian trading, the Nikkei 225 in Japan and the Kospi in South Korea both saw gains of 0.95% and 0.96%, respectively, while the Shanghai Composite fell by 0.25%. 

US markets ended the previous trading session in the black. The S&P 500 climbed 0.59%, the Nasdaq Composite increased 0.99%, and the Dow Jones Industrial Average increased by 1.08%. Today is Thanksgiving Day in the US, thus the markets are closed.

Crude oil prices

Investor confidence was further boosted by declining crude prices. Concerns of a potential price restriction on Russian oil and an increase in US product stocks led to a decline in crude oil prices.

Futures for Brent crude dropped 0.3% to $85.13. To $77.74 per barrel, U.S. crude oil futures declined by 0.2%. As the Group of Seven (G7) countries debated setting a price cap on Russian oil above the current market price, they had fallen more than 3% on Wednesday.

Indian rupee

The Federal Reserve minutes confirmed forecasts of a slowdown in the pace of rate hikes, which caused the US dollar to fall significantly. The Indian rupee increased to 81.63 to the US dollar from 81.8450 in the previous session.

Monthly F&O expiry

Since today was the last day of the current month’s derivatives expiry series, short covering by traders also had a significant role in the buying.

What should mutual fund investors do?

The stock market is currently rising to unprecedented heights.  The US Federal Reserve meeting minutes showed the rate-setting panel was more open and receptive to a slower pace of future rate hikes, which boosted bullish sentiment. 

The S&P BSE Sensex at all-time high, closing above 62,000 for the first time, and the Nifty crossed 18,500 intraday. According to the minutes of the November 1-2 meeting, “a “large majority” of policymakers thought it would “likely soon be appropriate” to halt the rate of interest rate increases.”

Every time the stock market exceeds a psychologically significant threshold, many investors, particularly those who invest in mutual funds, invariably wonder: Should we make a change? 

What should I buy or sell? Something further that will ensure their safety. The intrepid would like to know if there is a chance to earn additional profits.

India is the only one of the top 5 economies in the world that is predicted to expand at a robust 6%+ growth rate over the coming year. 

This largely explains why the equity market in this country is stronger than it is in other developed nations. 

This, along with increased tax compliance as evidenced by GST receipts, declining oil and commodity prices, a healthy banking sector, and anticipated double-digit earnings growth for the benchmark index over the next two years, should enable Indian markets to continue to offer superior returns.

The problem is that, as long as you are investing in accordance with your investment strategy, experienced mutual fund managers and advisors will advise you not to do anything. That obviously does not help.

Investors should always keep in mind why they are investing and where they are investing, according to the majority of investment managers. 

According to a fund manager, if they get this part right, they won’t have to worry about market levels. 

He claims that every day the market could move up or down, and that this is just information for investors, particularly those who hold mutual funds for a long time. “Day traders, not investors in mutual funds, are affected by daily market changes.”

That seems to be really petty. What you can do first is run a fast check on your investments. 

Check to see if all of your investments are proceeding according to your strategy. Here, we’ll use phrases like “asset allocation plan” and “investment plan.” 

Check to check if you are following your plan and haven’t deviated from it if you have such a strategy.

Why is it crucial? Well, the majority of us occasionally become risk-takers or cautious people depending on the market or some creative concept. 

However, when the market experiences adversity, such fiddling will ultimately become a significant problem. 

Because of this, it is crucial to make sure that your plan is being followed. To put it another way, you make sure you understand where and why you are investing.

Assuring that you are moving slowly is a crucial next step. This is only to make sure you are aware that we are entering a potentially risky area; you do not need to sell your mid- or small-cap schemes. 

Following a new peak, markets frequently experience nervousness and possible volatility. Just prepare yourself mentally.

It is crucial for beginner and inexperienced investors to keep making investments. Don’t let the turbulence or anxiety prevent you from making regular investments. Always keep in mind that we can’t always predict the market correctly and adjust your investments accordingly. 

Because of this, we make consistent investments throughout time to ensure that your goals won’t be significantly impacted by these new highs and lows.

Bottom Line

“India continues to be the bright spot on all equity markets. Investor confidence is at an all-time high as the Sensex soars to new highs every day. 

Setting realistic expectations for the state of the market today while maintaining discipline is crucial. Going slow with your investment will be a wiser strategy because there is so much unpredictability in the world. 

According to Harshad Chetanwala, founder of Mumbai-based wealth management company My Wealth Growth, one can consider investing 40% to 50% of their money at the moment all at once and the remaining amount over the course of two to three months while exploring for future chances.