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Nachiket Kelkar
Nachiket Kelkar

Markets

As Modi government turns three, Sensex, Nifty scale new peaks

brokers-celebrate Brokers celebrate as Sensex crosses 31,000 mark, in Bikaner on Friday | PTI

India's equity markets smashed new records on Friday, with the benchmark BSE Sensex riding past the 31,000 mark for the first time and the NSE Nifty50 scaling 9,600 on a day the Narendra Modi government marked three years in power.

The Sensex touched a high of 31,074.07 before closing at 31,028.21, up 278 points or 0.9 per cent. The Nifty50 closed 85 points or 0.9 per cent higher at 9,595.10. It hit a intra-day high of 9,604.90.

For the week, both the Sensex and Nifty rose 1.8 per cent.

Gains on Friday were led by heavy weights like Tata Steel, Reliance Industries and ITC.

Tata Steel jumped over 5.5 per cent after a German media report indicated that a possible merger of the European steel businesses of Tata Steel and Thyssenkrupp could yield annual savings of 400-600 million euros.

Elsewhere, RIL surged 2.7 per cent, ITC gained 3 per cent, Power Grid was up 2.5 per cent and Asian Paints and Adani Ports gained around 2 per cent. Overall, while auto, private banks and capital goods stocks were among the gainers, several healthcare stocks continued to trade weak.

“Majority of Narendra Modi government's efforts in the last three years have gone towards building the right ecosystem for the big leap that India is capable of making, and the best is yet to come. This hope and expectation is getting reflected in the financial markets,” said Sageraj Bariya, vice president at East India Securities.

When Modi government took the oath of office on May 26, 2014, the BSE Sensex closed at 24,716.88. Since then, the benchmark index has accelerated 25.50 per cent.

While foreign institutional investors continue to pour into Indian markets, domestic retail investors have also joined the party, largely through systematic investments in mutual funds.

According to NSDL data, In 2014-15, foreign portfolio investments in the equity markets touched Rs 111,333 crore. While they sold Rs 14,172 crore in equity in 2015-16, they again net invested Rs 55,703 crore in 2016-17 and so far in the current financial year, they have invested Rs 11,401 crore in equity markets, taking their total investments in the last three years to Rs 164,265 crore.

On the other hand, domestic fund houses too have been net buyers during the period. Over the last three fiscal years, Rs 196,000 crore have flowed into equity mutual funds as domestic investors have been attracted to equity markets as interest rates on bank deposits have come down and the real estate market has been sluggish.

Investor sentiments have only improved over the last few months, with the BJP government winning elections in the key state of Uttar Pradesh. Good monsoon expectation and the US Federal Reserve hinting this week of only gradual interest rate hikes ahead has also strengthened the equity bulls.

Some analysts, though are concerned with markets scaling new peaks, feel any negative surprises on the economic or geo-political front globally could lead to a sudden sell-off in the equity markets.

“Every move that the market makes, the valuations seemingly look more expensive. Liquidity is strong and the flows are not going go abate. In a liquidity driven market, some developments may happen and there may be a knee jerk reaction. Investors have to be ready for a sharp correction,” said Mayuresh Joshi, fund manager at Angel Broking.

However, with fund flows seen remaining strong, the government maintaining its fiscal targets and reforms measures expected to continue, Joshi feels even if there is a market correction it won't last for long.

If the markets correct, several large caps and quality mid-cap stocks will become attractive again, creating fresh buying opportunity, he added and said retail investors would be better off investing systematically through mutual fund SIPs.

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Topics : #sensex | #Nifty

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