Nifty 50 on a Historic Winning Streak. So, What’s Next?

The Indian equity market achieved a significant milestone last week when Nifty 50 extended its winning streak to 14 consecutive trading days, the longest in its history. This momentum pushed the index to close at a record high for the fifth straight session on Monday. Over the last 13 trading sessions, Nifty 50 has gained just under 5 per cent, raising a question in many investors’ minds: What’s next? Will the market take a breather, or does this streak signal resilience and potential for further gains after a brief pause?

To gain a perspective, let’s take a look at a similar historical event. The world record for the longest continuous rise in an equity index belongs to Japan’s Nikkei 225, which achieved a remarkable 16-day winning streak from October 2 to October 24, 2017. During this period, the Nikkei gained approximately 7.11 per cent. A week after the streak ended, on October 31, it was up by another 1 per cent, and by November 24, a month later, it had risen by 3.42 per cent from its closing level on October 24.

This historical context suggests that extended winning streaks, while rare, don’t necessarily lead to immediate downturns. In the Indian market, the Sensex, which has a longer history than the Nifty, has recorded a maximum winning streak of 11 days, a feat it achieved three times, the first being in June 1983. After these streaks, the market’s performance was stable, with marginal gains or losses in the following weeks. A similar scenario played out in October 2003, when the Sensex posted an 11-day streak and continued to show modest gains in the following weeks and month.

The key takeaway for investors is that an extended winning streak, in itself, should not be a cause for concern. History shows that markets can continue to perform steadily, even after such streaks. The key difference this time from the earlier stance when the indices had a long winning streak is that Nifty 50 is trading at an all-time high, whereas previous streaks occurred at lower levels. While this makes the current scenario unique, it does not necessarily imply an imminent downturn.

Investors should focus on broader market fundamentals and not be swayed purely by the number of consecutive winning days. Meanwhile, despite the market reaching all-time highs, a segment of it has begun to underperform. The S&P BSE SME IPO index, which nearly tripled over the past year and surpassed the one lakh mark, has declined by 7 per cent in the last week. This underperformance follows a study released by the market regulator, SEBI, which raised concerns about the excessive enthusiasm in the SME IPO segment and the apparent lack of adequate checks and balances.

Some SME stocks had even doubled on their listing day until the NSE recently imposed a cap of 90 per cent on such gains. SEBI has cautioned investors against blindly investing in SME IPOs, noting that some promoters present an overly optimistic view of their business operations. Investors are urged to exercise caution, remain vigilant about these trends, and avoid relying on unverified social media posts, tips, or rumours when investing in SME stocks.

My advice is to avoid treating SME IPOs like a casino. You might enjoy the gains while the market is hot, but when the music stops, you could find yourself facing significant losses. The study also highlights a common investor behaviour: selling winning stocks too early and holding on to losing ones, which can be particularly dangerous. To help you navigate these waters, our cover story in this issue focuses on IPO strategies, offering insights and guidance to help you make profitable investment decisions. So, be smart and invest wisely!

RAJESH V PADODE
Managing Director & Editor