Markets scale fresh highs; Nifty hits 19,000-mark, Sensex tops 64,000
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India’s benchmark indices posted strong gains for a second straight day to hit record highs on Wednesday, with the Sensex breaching the 64,000 mark for the first time and the Nifty50 index topping the 19,000 level in intraday trade. Both the indices, however, settled below these milestones.
The Sensex closed the session at 63,915 with a gain of 499 points, or 0.8 per cent, after hitting an intra-day high of 64,050. The Nifty, on the other hand, retreated after touching 19,011 to settle at 18,972, up 155 points, or 0.8 per cent.
Foreign portfolio investors (FPIs) pumped Rs 12,350 crore into domestic shares on Wednesday, stoking broad-based gains in the market. All the 19 sectoral indices of the BSE ended with gains, although a large portion of the foreign inflows was on account of block trades. Indian equities have been riding high on robust capital flows from FPIs amid an optimistic growth outlook and improving macroeconomic indicators.
“The all-time high reflects the confluence of two factors: the relative earnings resilience of India Inc based on strong bottom-up drivers in a difficult global macro environment,” said Trideep Bhattacharya, chief investment officer (CIO)-equities, Edelweiss MF.
Amar Ambani, group president & head of institutional equities, YES Securities, said India stood out against the backdrop of a slowing world economy and a weakened China. “Manufacturers and investors are looking for alternatives to China, and presently, India is the best bet in Asia. A lot of money is on the sidelines. FPI money should keep flowing into India, with expected stable yields and a healthy outlook for the rupee,” he said.
“Nifty earnings kicker will come from expansion in margins, as companies keep some of the gains from falling input costs, and strong results from Banks and NBFCs,” Ambani added.
Reliance Industries rose 1.3 per cent and made a 102-point contribution to the Sensex gains. HDFC Bank and HDFC extended gains ahead of their impending merger. Tata Motors rose 2.4 per cent and was the best-performing Sensex stock, after its subsidiary Tata Technologies got the go-ahead to launch its IPO.
components, Adani Enterprises and Adani Ports gained the most following the US-based GQG Partners’ fresh wager on the group.
A rally led by tech stocks in the US markets overnight kept risk sentiment positive. The US investors were enthused by fresh manufacturing and consumer confidence data, which pointed to economic growth despite continuous hikes in interest rates for most of the last 12 months. However, investors were concerned about two quarter-point hikes as per the latest guidance by the US Federal Reserve.
From this year’s lows, the Sensex and the Nifty have gained about 12 per cent each. This has pushed valuations into expensive territory relative to historical levels. This has turned some analysts cautious.
“We remain cautious for now, given exceedingly rich valuations, margin erosion depleting India’s relative profitability, consensus EPS growth expectations remaining too optimistic (certainly versus the delivered track record), the RBI likely lagging EM central banks in the timing and scale of policy easing, and our econometric model signalling the market is 14 per cent overbought,” said a note by CLSA.
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