BSE Sensex held firm above the 32000 level which it hit today for the first time ever after soaring over 286 points intraday, with cigarette and FMCG major ITC, and lenders ICICI, HDFC and Axis Bank, leading gains, and closed at a record high of 32,037. Broader NSE Nifty too soared 77.3 points intraday to an make fresh high, and ended at an all-time high of 9,891.7, coming within the kissing distance of 9,900-mark, and leaping further towards the bigger 10,000-level.
ITC Ltd shares were up 3.22% at Rs 339.3 in the late afternoon trade, with heavyweight banking and finance companies ICICI Bank, HDFC Ltd and Axis Bank up 1.55%, 1.11% and 1%, respectively on BSE. Reliance Industries, up 0.5%, and Larsen and Toubro, up 1.28% were also among the top contributors to the Sensex gains in the afternoon.
Low inflation, global cues
Among the factors that fuelled the rally in markets today was the historically low consumer inflation announced last evening, which came in much below expectations, triggering stern comments from the government and speculation of a rate cut by the Reserve Bank of India. Strong corporate earnings expectations, firm global cues and institutional inflows also seemed to have helped the markets gain today.
“The Sensex touched the psychological 32000 mark on July 13 aided by expectations of a rate cut (post the low CPI and IIP numbers announced on July 12), good monsoons and overcoming the fears of disruption due to introduction of GST,” Deepak Jasani, Head – Retail Research at HDFC Securities, said in a note.
Banks play today, but were in a lull so far
Over a longer period of late, Deepak Jasani said that the rise in the markets has been aided by the risk-on sentiments prevailing across the globe. “The latest 1000 point rally in the Sensex was driven by Reliance, large Pharma stocks, Bharti Airtel, ITC and Maruti. Unlike in the past, Banks & IT stocks did not contribute meaningfully to the latest rise. Local fund and non-fund inflows contributed to this rise,” he said.
Earlier last month, Ridham Desai, MD, Morgan Stanley, said in an interview with CNBC-TV18 that he expects NSE’s Nifty index to reach 30,000 points in the next five years, on the back of renewed consumption, greatly improved exports and infrastructure spending by the government. This roughly works out to a CAGR of 25.33% for the Nifty over the next five years. This week, Yogesh Nagaonkar, Fund Manager, Bonanza PMS, told FE Online that he is bullish on Indian equity markets for near term, pointing out to valuations that are still attractive. “We don’t see any macro concerns,” he said, adding that one should add good quality companies in the portfolio.
Stay invested, but be cautious
However, Deepak Jasani of HDFC Securities has added a word of caution today, saying that Valuations look stretched going by historical parameters. “Retail investors… may avoid chasing stocks that are at steep valuations but keep hunting for opportunities in the small/midcap space where promoters show genuine interest in improving shareholder value by restructuring their businesses/companies,” Deepak Jasani said.