Valuations stretched but mkt may chug on further: Experts

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The benchmark indices ended the first day of the week on a flat note after seeing consolidation throughout the session. The 30-share BSE Sensex closed at 15,375.04, down just 3.92 points while the 50-share NSE Nifty shut shop at 4572.30, up 3.75 points.

'Struggling but can see some upside'

SA Narayan, MD, Kotak Securities, said the market had rallied a lot in the recent past and was now struggling to go up. He added that it would have been easy for the market to break its intermediate high of 4,650 had Reliance Industries, which has a high weightage on the index, posted good quarterly results.

"The good part is all institutions who did participate up to now are continuing to hold on the positions; they are not coming in the market to sell, you are finding new interest coming in but they are finding the valuations stretched," Narayan said, but added that the market had been rallying more on liquidity than on valuations. "So there is some amount of upside left in the market more driven by liquidity than anything else. Is the downside substantial from here? I don't think so because even at 10% fall there is lot of investors willing to buy into the stock."

'Risk-reward ratio equal'

The risk reward ratio to buy into the markets now was equally balanced, Dipan Mehta, member of the BSE and NSE, said. "It seems likely that the market could resist the earlier highs and maybe a gush of liquidity or sharp build up in future's markets could take the Nifty and the Sensex to new highs," he said, adding that corrections these days were short-lived and were bought into and that Nifty could test 5,000 levels ahead. "I don't know whether the investors should participate in that last 300-400 points as far as the Nifty is concerned because at Nifty levels of anywhere above 4,700, the risk reward is biased towards the risk because the earnings do not justify these kind of valuations given that there are still many risks in the system and most of the gains which we are seeing the companies make in the corporate results on account of savings in cost," Mehta said.