The benchmark BSE Sensex and NSE Nifty 50 hit fresh life highs in intra-day trading on Tuesday as investors continued to lap up shares amid expectations of political stability and policy continuity after the Lok Sabha elections. Companies reporting strong sales numbers in sectors like automobiles and real estate have also been in demand over the last few sessions, driving the wider markets.
The BSE Sensex touched a new high of 75,124.28 during market hours on Tuesday and the Nifty50 scaled 22,768 levels. However, some profit booking was seen post the rally and both the indices eventually settled slightly lower. The BSE Sensex closed around 59 points or 0.08 per cent lower at 74,683.70 level. The Nifty 50 ended down 23.55 points or 0.10 per cent at 22,642.75 level.
ICICI Bank, Infosys, Tata Steel, Maruti Suzuki, Bharti Airtel and Mahindra and Mahindra were among the gainers on the Sensex on Tuesday.
Elsewhere, select realty stocks saw big gains; Sobha was up 5 per cent, Godrej Properties jumped more than 4 per cent and Puravankara surged more than 16 per cent. Recent quarterly updates by real estate companies, shows strong sales momentum continues, and this has lifted investor sentiments.
Infosys gained after Bank of America upgraded its rating on the company. Several other software services companies also rose on Tuesday.
The BSE Sensex and Nifty 50 gained more than 25 per cent in 2023-24 financial year and are further up around 1 per cent so far in April. Shares of public sector companies have been in strong demand over the past year, with the BSE PSU Index accelerating over 90 per cent in the financial year ended March 31, 2024.The mid and smallcap indexes also surged over 60 per cent and 70 per cent last year. The broader markets are expected to rally further.
"After a stellar FY24, Indian equity markets continue to march higher into new territory. Hopes of a favourable outcome from the ensuing general elections and the subsequent policy thrust are keeping sentiments upbeat. The announcements of encouraging monthly/ yearly data and some operational/ order announcements by companies are attracting stock specific buying," noted Dhiraj Relli, MD and CEO of HDFC Securities.
Strong fund flows from domestic investors via mutual funds as well as from foreign institutional investors have contributed to the market momentum too. Total inflows into India's equity markets via domestic and foreign investors have topped $50 billion in 2023-24. Of this around $2 billion per month has come from domestic investors via systematic investment plans of mutual funds.
"India is currently experiencing a mini-Goldilocks moment due to solid macroeconomic conditions, healthy corporate earnings, peaking of interest rates, moderate inflation print, and ongoing policy momentum. This is, of course, ably supported by flows," noted Motilal Oswal Financial Services in its strategy report this month.
The Motilal Oswal analysts note that India's GDP is likely to exceed $4 trillion in FY2025/26.
"Expectations of political continuity after the forthcoming Lok Sabha Elections should bolster the overall economic momentum further, with a focus on infrastructure, capex and manufacturing occupying the centre stage," they said.
All eyes will now be on the quarterly earnings that corporate India will announce this month. Investors will also be eyeing US inflation data this week. The US Federal Reserve is expected to begin cutting interest rates this year, but in recent weeks there have been signals that it is no no hurry to do so after a surprise spike in inflation in February.
Motilal Oswal expects Nifty 50 earnings to grow 6 per cent in the January-March quarter. Domestic cyclicals like automobiles and banking and financial services companies are expected to drive the overall earnings growth; the two sectors are expected to post 20 per cent and 15 per cent growth respectively in the fourth quarter. Healthcare and cement companies too are expected to report a strong earnings growth of over 30 per cent.
On the other hand, technology firms, capital goods companies and consumer goods majors are expected to report moderate growth between 4 per cent to 7 per cent.
Automobiles, real estate, hotels, public sector undertakings, capital goods, infrastructure and industrials have made a strong come back over the past year. Pick up in government capex has also boosted sectors like utilities, railways and defence.
Analysts though have a warnings for investors who are still lapping up mid and small cap stocks, in the backdrop of last year's stellar run.
"Investors will do well to be cautious in entering small/ midcaps without adequate due dilligence," said Relli of HDFC Securities.
V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, too noted that valuations of smallcap segment are "elevated and unjustified."
