The benchmark Sensex on Wednesday breached the 80,000 mark for the first time during intraday trading, completing an impressive ascent of nearly 10,000 points from the Lok Sabha election results-day low of 70,234 on June 4.
Taking poll results-related disappointments in its stride, the index has surged almost 14 per cent, buoyed by hopes that the new coalition government will stick with its economic agenda and stimulate growth and capital expenditure.
After peaking at an intraday high of 80,074, the 30-share index closed at 79,987, gaining 545 points or 0.7 per cent. Top weight HDFC Bank alone contributed half of the day’s gains with its shares gaining over 2 per cent amid hopes of its weighting in the MSCI index getting doubled, leading to passive inflows of $3 billion.
The Nifty 50 also saw a strong finish, ending at 24,287 with a 163-point rise, or 0.7 per cent, as 40 of its components ended higher.
Robust liquidity from foreign and domestic institutional investors, positive macroeconomic signals, and a healthy corporate earnings outlook have propelled both Sensex and Nifty 50 to double-digit gains this year. In 2024 so far, the Sensex has climbed 10.7 per cent, while the Nifty 50 has risen 11.76 per cent.
Investor sentiment remains high, bolstered by renewed prospects of imminent rate cuts in the US.
On Wednesday, foreign portfolio investors (FPIs) purchased shares worthRs 5,484 crore, while domestic institutional investors sold shares worth Rs 924 crore. Despite recent outflows, DIIs have injected over Rs 2.4 trillion into Indian stocks this year. FPIs have also turned net buyers on a year-to-date basis since June.
“Retail inflows are very strong. Foreign flows, too, have turned positive. There is ample liquidity to support the markets. The stage is set for the Nifty 50 to reach 28,000 or 30,000 within a year and the Sensex to hit 100,000 in two years. There could be bouts of correction, but overall, the outlook is positive,” commented Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services.
The return of the National Democratic Alliance government, albeit a reduced majority, and the retention of key ministers have bolstered market-friendly policy expectations. Additionally, moderating US inflation has heightened hopes for an earlier rate cut by the Federal Reserve, making emerging markets like India more attractive.
UR Bhat, co-founder of Alpahniti Fintech, noted that India’s robust high-frequency indicators distinguish it in a troubled global economy. “Savings are being channelled into mutual funds and financial assets, ensuring a $2-3 billion net flow into equities monthly. Post-pandemic market entrants are now driving volumes, with domestic investor flows remaining steady. A sharp correction exceeding 20 per cent would be the true test,” Bhat remarked.
Following recent gains, valuations have surpassed long-term averages, with the Sensex and the Nifty 50 trading at a one-year forward price-to-earnings ratio of 21.3x and 21x, respectively, compared to their five-year averages of 20x and 19.2x. “Valuation is a concern, but there has to be a specific event to trigger a market correction,” added Bhat.
Agrawal observed that the FPI outlook for India has improved as the Lok Sabha elections are behind now. The upcoming Union Budget and June quarter earnings are anticipated to steer market direction.
Among the leading Sensex gainers on Wednesday were Adani Ports (up 2.5 per cent), Kotak Mahindra Bank (2.4 per cent), and HDFC Bank (2.2 per cent).
Overall, 2,295 stocks advanced while 1,640 declined, with the market capitalisation of all BSE-listed stocks hitting a record Rs 445 trillion ($5.33 trillion).
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