The Sensex has gained 25 per cent so far this year— the most among major global markets
The relentless rally in the domestic market drove the Sensex
past the 60,000 mark on Friday, but weakness in global bourses due to the debt crisis at China Evergrande
Group marred celebrations and resulted in the index shedding about 300 points from the day’s high.
ended the session at 60,048 with a gain of 163 points, or 0.27 per cent. It touched an intra-day high of 60,333. The Nifty, on the other hand, closed at 17,853, gaining 30 points, or 0.17 per cent.
The latest 5,000-point rally for the Sensex
has come in record 28 trading sessions. The index had crossed the 55,000 mark for the first time only on August 13.
From Covid-19 lows in March 2020, the Sensex has jumped about 2.3 times, more than any other major market in the world. The benchmark indices have rallied about 15 per cent since August, even as most global markets
have remained flat during this period.
Relentless buying by both domestic and global investors continued amid an easy monetary stance and optimism about revival in the domestic economy, propelling the markets
to new lifetime highs.
Foreigner portfolio investors have pumped $9 billion (over Rs 65,000 crore) into domestic stocks this year, while emerging market peers such as South Korea have seen outflows. The increased pace of vaccination, fall in infections, easing of restrictions across the country, and improvement in high-frequency economic indicators have boosted investor sentiment.
In the past 18 months, a record number of first-time investors have entered the market. During this period, the markets
have rallied without any meaningful correction. This has given them courage to buy more stocks even at expensive valuations, say market observers.
“The rally in the domestic market is driven by positive global cues, strong inflows by domestic and overseas investors, good corporate earnings, falling Covid-19 cases, upbeat corporate commentaries and low cost of capital. Amid the buoyant sentiment and increased activity, valuations have reached elevated levels and demand consistent delivery on earnings expectations,” said Motilal Oswal, managing director and chief executive officer, Motilal Oswal Financial Services.
The Sensex has gained 25 per cent so far this year— the most among major global markets.
The outperformance has increased India’s valuation premium to other global markets.
“Rising inflation risk and withdrawal of ultra-easy monetary policy by global central banks (mainly the US Fed) may trigger a sharp rise in bond yields, which can cause risk assets to correct sharply. Hence, one can remain invested with a vigilant eye on the move in yields world over which can result in a sharp 10-15 per cent correction from the current levels,” said Piyush Garg, CIO, ICICI Securities.
On Wednesday, Fed Chair Jerome Powell said the US central bank would begin scaling back asset purchases in November and complete the process by mid-2022. Fed officials also indicated that there could be a possible hike in interest rates next year.
Investors on Thursday largely welcomed the Fed’s plan as it has been seen as a sign of a strong economic recovery.
However, mood once again turned cautious ahead of the weekend as investors assessed whether the collapse of Evergrande
would have a contagion effect on the world markets and economy. Metal shares fell globally. Back home, the Nifty Metal index fell over 2 per cent, with Tata Steel and Jindal Steel dropping over 3 per cent each.
Investors feared a slump in demand for commodities due to troubles in China, the world’s biggest consumer.
The overall market breadth remained weak on Friday, with 1,994 stocks ending with losses and 1,285 posting gains on the BSE. The broader market Nifty Midcap 100 index fell 0.8 per cent.
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