Nifty at 20,000 it must be fundamentals over FOMO

Good God, Nifty is almost 20,000!

Is Nifty 20,000 a time to exit the market? Not necessarily. Exiting shouldn't depend on index levels but on whether your stock fits your long-term goals, its future potential, and if you have a better use for your money. The Sensex has delivered 17.4% CAGR over 44 years, despite crises like wars and recessions. Yet, investors often get distracted by short-term noise instead of focusing on the bigger picture.

You may also want to read about Best Infrastructure Stocks in India 2025

Table of Contents

1. Good God, Nifty is almost 20,000!
2. It boils down to fundamentals versus FOMO
3. Analyzing Nifty 50’s Growth: Earnings, Valuations & Economic Drivers
4. Can you price stock like works of art?

It boils down to fundamentals versus FOMO

When markets hit new highs, investment decisions are often driven by two key factors: fundamentals and FOMO. On one hand, strong fundamentals—like India's robust consumer demand and a projected GDP rise from $3.5T to $5T—justify staying invested.

On the other hand, FOMO (fear of missing out) can push investors to buy impulsively, just because others are profiting. While fundamentals offer a rational basis, FOMO is risky and often leads to poor decisions. 

Analyzing Nifty 50’s Growth: Earnings, Valuations & Economic Drivers

Earnings Growth: Nifty 50 companies have shown strong double-digit earnings growth, driven by sectors like banking, IT, auto, and capital goods. Profit margins are expanding due to operating leverage and post-pandemic recovery.

Valuations: The Nifty trades at a moderate premium to its long-term average P/E, reflecting investor confidence and growth expectations. However, valuations vary widely across sectors—defensive stocks trade at higher multiples than cyclical ones.

Economic Drivers: India’s economy is supported by robust GDP growth (~7%), strong capex, government reforms, and consumption recovery. Schemes like PLI, infrastructure investments, and stable inflation help sustain corporate growth.

Global & Domestic Flows: FII and DII inflows remain supportive, with India seen as a long-term structural growth story. Global volatility (US Fed moves, oil prices) may cause short-term swings, but the domestic outlook remains positive.

Can you price stock like works of art?

During the digital boom, many Indian startups quickly jumped from unicorns to decacorns, with valuations often detached from fundamentals. Skeptics likened it to buying art—driven more by hype and the Greater Fool theory than real value.

This brings us back to the core question: Should you sell when markets are at peak? The answer must be based on fundamentals, not FOMO. Here are key points investors should consider before deciding to buy, hold, or sell.

• Do you really need the cash?

If you are sitting on a very neat profit on the stock and you have been holding it for a long time, it looks like a good idea to sell and cash in the profits. But say, a stock like Kotak Bank converted an investment of Rs10,000 into Rs350 crore over 38 years. How do you really decide it is time to exit such a stock? One question to ask is whether you really need the cash at this point in time. 

Yes, liquidity is one part of the story but that is not only what the need for cash is all about. Obviously, you don’t want to sell a multi-bagger and use the money for your creature's needs. That is bad financial planning. You want to invest in another asset that can multiply in value over time. If you don’t see such opportunities, rather stick to your holdings rather than trying to sell out and then wonder what to do with the cash.

• Financial plan fit and portfolio rebalancing

This is the second strong reason for you to exit a stock at high levels in the market. For instance, if you are overexposed to banks and your allocation is 20% more than the Nifty allocation, it is time to adopt course correction. In such cases, selling out of a bank (even fundamentally sound ones) has a logic to it. The other issue whether it is essential to sell the stock as part of your routine portfolio rebalancing. 

You rebalance your portfolio for various reasons. Stocks could have rallied too sharply or some of the stocks may have been too good to be true or in some cases, your goals may have changed. In such cases, it is best to allow the stock to leave your portfolio based on the valuation assumptions. Here again, the consideration cannot be FOMO, but purely based on your own financial plan.

• What if you are confused with the market?

The funny part about the markets is that investors tend to be ambivalent when they need to take a stance. Here again there is a simple rule to follow. For instance, if you plan to exit after making a good profit, you have a choice between further maximizing profits and minimizing current regret. The former option is uncertain, while the latter is certain. Just use the opportunity to sell out of the stock and ensure that you can minimize your regret. It is OK to celebrate with some profits rather than regret at leisure.

Before you sell a stock be very clear on 2 things. Firstly, how are you going to put the money to investment use and secondly, how much would you lose by way of taxes. Once you have an answer to both these question, the decision becomes easy. The moral of the story is to let your decision be driven by your goals first and then  by fundamentals. Don’t let FOMO come in between!