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Investors, Don’t Buy The Rumour

The stock market is booming with the Sensex currently hovering around 50,000-mark. At this level the market capitalisation works out to around $2.7 trillion. It may be recalled that at the beginning of the Covid-19 pandemic in March 2020 the Sensex had crashed to 25,638 points. So did the market cap to $1.3 trillion, its lowest since March 2016. Now, there are visible signs that the economy is picking up if one looks at the performance of the sectors like auto, infrastructure, healthcare, IT and FMCG. A number of brokerage houses seem to be bullish; some are predicting that Sensex will touch the 100,000-mark by 2025. Such a bullish outlook is unleashing a buying frenzy among investors. The herd mentality is evident. Nearly 6.3 million demat accounts were added during April-September 2020 to take the total demat accounts to 2.13 crore. Work from home saw people investing in both primary and secondary markets. Thirty companies have already raised around Rs 31,000 crore via IPO in FY-21. But, post-listing, are they all doing well? Not really, says The Hindu Business Line report. “India’s IPO market boom, which began exactly a year ago in March 2020, with the SBI Cards offer, is showing signs of fatigue. Every second stock that posted gains on debut in the last one year has slipped.”  So, the opportunity to make a quick kill post listing is clearly waning. Now, some of the fly-by-night operators are recommending below par or penny stocks. With the second wave of pandemic hitting the country, it would be advisable for investors to ignore the conventional market adage “Buy the rumour, sell the news.”