As the bull run persists on Dalal Street, retail investors have multiple reasons to celebrate. Skeptics may suggest that the music could stop at any moment, but optimists argue that it's hard to stop dancing when the music is still playing. Both benchmark indices have frequently reached their all-time highs in the past couple of months.
Consequently, benchmark indices have recorded double-digit returns until Dec 22. The BSE Sensex 30 surged by 16 percent from Jan 2 to Dec 22, closing at 71,107. Similarly, Nifty 50 demonstrated robust performance, rising by 17 percent until Dec 22, settling at 18,197.
In such a bullish environment, investors might wonder about the sustainability of this bull run and when the 'party' might come to an end.
One expert suggests that investors could consider booking profits if a bull run has significantly increased the equity value beyond the predetermined ratio.
For example, if an investor 'X' intended to keep the equity portion of the portfolio under 60 percent and, due to the bull run, the equity portion now exceeds 75 percent, it is advisable to redeem 15 percent of the portfolio to rebalance.
"Investors can book profit if the asset allocation is skewed towards equity. By doing the profit booking, one can do the rebalancing," says Amol Joshi, founder of Plan Rupee Investment Services.
"Another scenario for booking profit could arise when your expectation from that particular investment has already been met. If someone wants to make a fresh investment, one can do so in hybrid funds in the next six to eight months via STP (systematic transfer plan)," he adds.
Another consideration is that during a bull run, small-cap funds tend to grow even faster, making the portfolio more vulnerable to volatility.
Deepesh Raghaw, a Sebi-registered investment adviser, suggests, "Markets have done pretty well of late, and whenever that happens, small caps perform even better than the benchmark index. This trend may continue, but we don’t know for sure. So, it is recommended to make some room for contingency. We should check what risky stocks are there in the portfolio and exit them in favour of either large caps or debt funds."
“It is better to check the portfolio and if it’s highly skewed in favour of risky assets, then it is recommended to reduce the allocation," he adds.
Regardless, the timeless financial advice of staying calm amid market euphoria is always valuable. Deepak Gagrani, Founder of Madhuban Finvest, emphasizes, “As Indian stocks soar, it’s crucial for investors to focus on emotional intelligence and stick to their asset allocation strategy. Guard against FOMO, avoid big commitments, and don’t exit solely based on market fears. While maintaining equity exposure, consider rebalancing towards underperforming large caps for better valuation comfort."
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