Breathtaking stock market rally in India leaves seasoned investors stunned


As benchmark indices of India’s stock market scaled new highs in trade on Wednesday, sheer buoyancy of stock prices even in the broader markets made several seasoned investors waiting on the sidelines for a meaningful correction mere spectators, said S. Ranganathan, Head of Research at LKP Securities.

The domestic indices ended Wednesday’s session after hitting fresh all-time highs during the day. The NSE Nifty 50 soared 54.70 points or 0.82 per cent to 18,972.10, while the BSE Sensex surged 499.39 points or 0.79 per cent to 63,915.42.

The Financial Services Index almost kissed 20K on Wednesday to register yearly highs as credit demand is picking up even as the monsoon is seen covering lost ground in several parts of the country. Investors also witnessed a listed airline in India cross a market cap of Rs 1 lakh crore in Wednesday’s trade, Ranganathan said.

Domestic equities had a dream run on Wednesday with Nifty and Sensex scaling lifetime highs at 19,006.7 and 64,037 levels, respectively. The index remained in momentum throughout the session to close with handsome gains of 155 points (+0.8 per cent) at 18,972 levels. Even Nifty Bank made a new high of 44,508 levels. All sectors ended in green with strength seen in metals, pharma, and oil and gas.

Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services, said after making several attempts in the past few days, Nifty finally managed to cross its previous highs. Strong institutional flows, healthy macros, and robust earnings growth drove the domestic market toward its new highs.

Further, robust US consumer and home sales data soothed the investors’ sentiments.

“With the onset of the monsoon and RBI taking a rate pause, we expect market momentum to continue and remain buoyant,” Khemka said.

The rise in domestic stocks is in tune with the global market rally and firm domestic macro fundamentals. Strong fundamentals including a firm GDP outlook, moderate inflation and strong purchases by foreign investors saw the markets trading in the green.

The inflation in the US and India is moderating, but what is to be seen going ahead is whether this trend is sustainable.

“U.S. stocks ended higher Tuesday, led by mega tech stocks, with data suggesting the economy remains resilient despite higher interest rates as investors approach the end of the second quarter and the first half of the year,” said Deepak Jasani, Head of Retail Research, HDFC securities.

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the high market valuation, however, continues to be a concern for domestic markets in the near term. “Investors can book some profits at record highs,” Vijayakumar suggested.

Christy Mathai, Fund Manager- Equity, Quantum AMC said from a macro standpoint, India stands out relative to peer countries, with inflation moderating, investing activity and growth picking up. Growth hurdles of the Indian economy have been corrected to a large extent.

Infrastructure has been improving consistently, corporate balance sheet strength has improved, and the financial system is in a robust state to fund the potential growth. Despite the recent rally, fundamentals point to the possibility of strong earnings growth in the medium term, Mathai said.

Valuations around the long-term average makes a strong case for reasonable returns as earnings upcycle gains strength.  Investors could be better off by staying invested and maintaining their equity allocation in line with long term asset allocation plans.

Overall Indian markets, Nifty have remained flat week on week barring today’s uptick which resulted in Nifty making new highs, says Jaykrishna Gandhi, Head – Business Development, Institutional Equities, Emkay Global Financial Services.

Bank Nifty has under-performed during this period and is poised to lead the rally into July on back of the HDFC merger, he said.

The US markets continued the positive data with consumer confidence climbing to highest levels since January 2022, new home sales jumped 12.2 per cent to highest levels since February 2022, and lastly home prices were up 0.9 per cent in April for the top 20 cities in the US.

Trideep Bhattacharya, CIO-Equities, Edelweiss MF said the Nifty all-time high reflects the confluence of two factors, namely, the relative earnings resilience of India Inc. based on strong bottom-up drivers in a difficult global macro environment and post late start, the encouraging recent progress of monsoons across India.

It is to be noted that Indian stock markets were to remain closed on Wednesday on account of Bakri Eid (Id-Ul-Adha), but has been rescheduled for Thursday. The National Stock Exchange and Bombay Stock Exchange put out circulars in line with the Maharashtra government’s notification released on Monday regarding the change in the Eid holiday.

Indian stock markets will remain closed next on August 15 for Independence Day celebrations.

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