Sensex nears life high on earnings boost; RIL, HDFC Bank shares gain

The Sensex on Tuesday came within kissing distance of a new lifetime high, after shares of Reliance Industries and HDFC Bank rallied amid earnings optimism. The 30-share index rose 305 points, or 0.85 per cent, to end at 36,239, just 44 points away from the record high of 36,283 touched on January 29. The Nifty gained 94 points, or 0.9 per cent, to close at 10,947. The previous record closing was 1,1130.4 on January 29.

Both the Sensex and the Nifty have gained 1,202 points, or 3.4 per cent, in the past nine trading sessions on June-quarter earnings optimism and supportive global cues, despite global trade tensions.

“Market rallied to a five-month high as fading trade war woes and shift in attention to corporate earnings supported investor sentiment. Any revival in earnings growth would give scope for re-rating in valuation for many midcap stocks, which were the real victim of the recent correction,” said Vinod Nair, head of research, Geojit Financial Services.

Shares in the midcap and smallcap space, too, have seen a rebound in the past fortnight. Since June 28, the Nifty Midcap 100 and Nifty Smallcap 100 indices have gained 4.5 per cent and 6.2 per cent, outperforming the benchmark indices. In June, however, both these indices had seen a rout even as the Sensex managed to post positive gains.

On Tuesday, foreign portfolio investors (FPIs) sold shares worth Rs 5.7 billion, while domestic institutional investors (DIIs) bought shares worth Rs 7.4 billion. 

Morgan Stanley expects Sensex components to report a 23 per cent year-on-year increase in profit in the June quarter, “Results should show some recovery and broadening of earnings growth,” Morgan Stanley analysts Sheela Rathi and Ridham Desai said.

Other foreign brokerages too are optimism on domestic earnings. “Besides the supportive base effect, there is also a strong revenue boost owing to higher global commodity prices,” Bijay Kumar, an analyst at Deutsche Bank wrote in a note. He expects earnings for stocks on the Nifty 50 Index to rise by 20 per cent.

India was shielded from trade risks due to its domestic market, analysts said. This has helped the Sensex gain 7.5 per cent in June quarter, the most among developing nations.