Invest Smart: What should be your investment strategy as Nifty breaches the 20k mark

The Nifty's recent achievement of crossing the 20,000 mark is indeed a significant milestone. As a result, investors are now contemplating their investment strategies and the path forward.

In this edition of Invest Smart, we delve into insights and guidance provided by Ashish Shanker, MD, and CEO of Motilal Oswal Financial Services, to assist you in navigating the current market landscape.

Shanker takes us back to September 2021, when the Nifty reached its previous high of approximately 18,000. Fast forward to today, more than two years later, and the Nifty stands at 20,000. Surprisingly, this reflects a modest rise of just a little over 10%. So, in essence, the recent surge may not be as dramatic as it appears.

Additionally, it's crucial to keep in mind that the Nifty represents the combined earnings and profits of its 50 constituent companies. Over the past two years, these companies have witnessed approximately a 30-35% increase in profits. This suggests that despite the new all-time high, the market is currently trading at a 30% discount compared to September 2021, as Shanker pointed out.

There has been ongoing discussion about irrational exuberance in the market, with some cautioning against mid-cap stocks. Drawing from his 25 years of market experience, Shankar advises exercising caution when attempting short-term market predictions, stating, 'Accurately forecasting near-term market movements is an elusive task.'

For new investors seeking entry into the market, Shanker recommends adopting a staggered approach. He further emphasizes that the nature of equity markets inherently includes volatility, and after recent surges, some degree of volatility and consolidation should be anticipated. Spreading investments over the course of a year can provide a more stable entry point.

Shanker adds that while the Nifty reaching 20,000 is an impressive achievement, it doesn't imply a rush to exit or hesitancy to invest. Staying committed to your long-term investment objectives, managing your expectations, and maintaining a diversified portfolio remain key strategies for navigating the ever-evolving financial landscape.