With markets at an all-time high, should investors register profits?

The benchmark Sensex index on the Bombay Stock Exchange closed above the 46,000 mark for the first time on Wednesday. In the past month, since closing above the 42,000 mark on November 9, the Sensex has passed five milestones. After rising more than 4,200 points or 10% in the past month as existing investors feel relief that their investments have gone well, many people are increasingly concerned about high valuations and lead them to make profits.

What drives the market?

Over the past two months, markets have risen due to a variety of factors, starting with signs of economic recovery in September and October, US election results, the announcement of successful vaccine trials by four manufacturers and a sharp rebound in GDP growth figures for the second quarter among others.

Huge liquidity in global markets also contributed to the rally in Indian indices, with REITs being a major contributor to this rally. While REITs injected a net Rs 60,358 crore into Indian equities in November, they invested a further Rs 23,094 crore in the six December trading sessions. In the current financial year, REITs invested a record Rs 179,369 crore. 📣 Follow Express explained on Telegram

Is there a concern?

While existing investors are profiting from the continued rise in the markets, investors are also worried about the strong surge and high valuations. This has led several investors to seek for-profit reservations. In November, equity mutual funds saw their highest monthly net outflow of Rs 12,917 crore due to increased redemptions. Market participants say investors are looking for profits as markets are at record highs.

In fact, redemption pressure by domestic investors has resulted in a large outflow of domestic institutional investors and they have withdrawn a net amount of Rs 59,837 crore between November and December (till date).

Should you make a profit or invest?

Investors in need of cash who need to achieve one of their financial goals of buying a house, car, or funding the children’s higher education can opt for for-profit booking at this time, as markets are on the rise. Those approaching retirement in a year or two may also be looking to make a profit and put the money in safe debt securities. It is not advisable to book profits if you have no reason because it must be clear where to reinvest this money. Right now, stocks seem like a decent place, as other investment options, including debt and real estate, don’t look too appealing.

As for new investors, it is advisable not to opt for a lump sum investment at current levels, however, investors can opt for monthly SIP investments through mutual funds.