No stopping bull run

Written by fe Bureau | Mumbai | Updated: Aug 29 2014, 10:45am hrs
Amid expectations of the economy finally bottoming out and the breakneck pace of foreign institutional investors (FIIs) buying in Indian debt and equities, the Sensex completed a seven-month long winning streak on Thursday to post its longest run in over seven-and-a-half years.

In YTD, the combined FII inflows in debt and equities now stand at $30 billion; less than $2 billion away from the second-best ever inflows recorded in CY12.

Click here for graph

Economists expect the June quarter GDP data, which would be released on Friday, to cross the 5%-mark. According to a Bloomberg survey of 46 economists held between August 22 and August 27, GDP for the June quarter could grow at fastest pace in nine quarters at 5.5%.

On Thursday, Sensex closed at its lifetime high of 26,638.11 points, while Nifty closed at its lifetime high 7,954.35 points.

On Thursday, FIIs were net sellers at $118 million, while domestic institutional investors (DIIs) bought $121 million worth of equities, as per provisional data on exchanges.

Click here for graph

In YTD, Sensex has outperformed all its emerging market peers, riding on the highest YTD FII inflows compared with other emerging markets. In YTD, the 30-share Sensex has gained 28.8% in dollar terms with the FIIs bringing in $12.9 billion in the Indian equities.

On Thursday, Sensex, Jakarta Composite and Kospi were the only three Asian indices that ended in green as Japans Topix index along with materials and consumer shares was pulled lower by a rising yen, according to Bloomberg.

Back home, experts believe that a recovery in the economy will rub on the corporate earnings. Bloomberg consensus forecasts for Nifty suggest EPS growth of c16% in FY15 and c17% in FY16 after an insipid c9% in FY14 and have exhibited positive momentum in past three months. While we believe that markets could correct in short term, positive earnings momentum and strengthening economic data, gives us comfort on the medium-term uptrend, Barclays said in a report.

Deutsche Bank expects a 5.6% growth in the June quarter. The IP growth in the April-June quarter has improved appreciably to a three-year high. This implies a robust pick-up in the industrial sector GDP growth for April-June as well, which is likely to push the headline GDP growth higher by about 100 bps than the previous quarters outturn, the investment banking firm said in a report. The rating agency Moodys estimates are relatively conservative at 5.1%.