Indian markets moved higher today but could not sustain gains. At day’s high, Sensex rose as much as 177 points to 38,564, extending this month’s rally that has pushed benchmark index Sensex closer to its record high. That is less than 500 points away from its all-time high of 38989, hit in August last year. Broader index Nifty jumped 0.50% to 11,572 at day’s high. Banking stocks were in the limelight today, with the sectoral index, Bank Nifty, hitting the important milestone of 30,000. In noon trade, Sensex was trading at 38,272, down 112 points.
Here are 10 updates from the stock markets:
1) This month’s rally, which has pushed up the Sensex by over 7% or 2,600 points, is in sharp contrast to Indian markets’ sharp underperformance in the first two months of this year as compared to other global markets.
2) Many analysts have attributed this month’s rally to a pre-election move in anticipation of a stable government at the Centre. Some opinion polls give an edge to the NDA government in the seven-phase Lok Sabha elections that start from April 11.
3) Foreign institutional investors bought a net $3.3 billion of Indian equities so far this month, accounting for more than half the $5.6 billion of inflows year-to-date. They have also raised holdings of bonds by $1.4 billion this month.
4) The gush of dollars sent the rupee to its highest level since August. The rupee was trading higher at 68.60 a dollar today.
5) Global investors have also increased their exposure towards emerging markets like India and China, betting that an earnings revival and a declining dollar will help emerging economies. Year-to-date, net fund flows into emerging markets total over $15 billion, Reuters reported.
6) Goldman Sachs has upgraded its view on India to “overweight”, expecting the Nifty to reach 12,500 in the next 12 months, up from its previous target of 11,700. Goldman Sachs had downgraded India to “marketweight” in September, citing near-term risks related to macro factors and earnings, stretched valuations and election-related uncertainties.
7) The risk/reward appears favourable for India once again, Goldman Sachs analysts said in a note on Monday.
8) Financial stocks, which have a significant weigh in benchmark indices like Sensex and Nifty, have led this round of the rally. Bank Nifty, the sectoral index, has surged nearly 12% so far this month. Jaikishan Parmar, senior equity research analyst at Angel Broking, said: “Many things have gone in favour of banking space such as formation of fresh bad loan gradually declining, recovery process under IBC peaking momentum and return of pricing for banks as many NBFCs face liquidity issue.” Analysts are expecting another rate cut by the Reserve Bank of India in April even though retail inflation climbed in February to 2.57%
9) Global concerns have also receded, with global central banks, including the US Federal Reserve, adopting a softer stance. The US Federal Reserve on Wednesday brought its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes this year amid signs of an economic slowdown, and saying it would halt the steady decline of its balance sheet in September.
10) Market observers are, however, keeping a close eye on crude oil prices, which have risen to 2019 highs amid production cuts led by OPEC and US sanctions against Venezuela and Iran.