Markets tumble after hitting record highs

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Published: May 24, 2019 1:29:25 AM

Going ahead, the stimulus for India could be the RBI cutting rates by 25-50 bps over the next six months.

The index hit an all-time high of 40,124.96 points in morning trade on Thursday, amid trends pointing towards a thumping majority for Modi-led NDA in the general elections.

Benchmark indices on Thursday hit their respective all-time highs during intra-day trades after early vote count leads showed Narendra Modi-led NDA getting a decisive majority in the Lok Sabha polls.

The Sensex rose to an all-time high of 40,124.96 points, while the Nifty surged to 12,041.15 points intra-day. The Sensex finally tumbled 298.82 points, or 0.76%, to close at 38,811.39. Similarly, the broader NSE Nifty settled 80.85 points, or 0.69%, lower at 11,657.05.
Global stocks slipped on Thursday amid political uncertainties in Europe and tensions in China over an extended trade standoff with the US. Europe’s bourses fell as Brexit worries, gloomy manufacturing data from Germany and the euro zone dampened the sentiment.
Despite global markets being volatile due to rising geo-political tensions, analysts at Morgan Stanley India expect that the country would be a favourable investment destination owing to various policy initiatives. Since the beginning of May, domestic institutional investors (DIIs) have bought stocks worth $1 billion and foreign portfolio investors sold equities worth $358.7 million, showed Bloomberg data.
Morgan Stanley has set Sensex target at 45,000 by June 2020. “Earnings could be heading into a new cycle and domestic flows should return with strength. We are adding Asian Paints and Interglobe Aviation to the focus list. We are overweight on domestic cyclicals, both consumer and industrials, as well as financials, and underweight defensive sectors including healthcare and technology,” shared Morgan Stanley in a report.

Nomura has reduced the active weight on autos and increased the active weight for consumer staples. Nomura had in the previous week warned about the economic growth slowdown, which has hurt corporate earnings. “From a long-term perspective, we remain sanguine on recovery of earnings as corporate earnings to GDP is at a multi-year low. However, there are near-term risks to earnings on account of slowdown in economic growth,” said Nomura in a report.

Morgan Stanley further warned about the risks like rising oil prices, Fed and trade tension. “As India has limited ability to withstand a rise in oil prices led by supply side factors, and if crude oil prices rise relative to copper prices then India’s relative performance to emerging markets will come under pressure,” warned Morgan Stanley.

Going ahead, the stimulus for India could be the RBI cutting rates by 25-50 bps over the next six months. The non-banking financial sector is likely to experience slower growth as the sector builds liquidity and capital. This will be an opportunity for the large banks. “It is also important for the government to consider further capital infusion into the public sector banks which are flush with deposits but are capital constrained from lending,” added Morgan Stanley.

Stock market wealth grows by `75.25 lakh crore in 5 years

The stock market wealth grew by `75.25 lakh crore in five years since the Lok Sabha polls in 2014, with Sensex gaining 61% during this time. An analysis of the stock market movements from May 16, 2014 to till date showed that the Sensex jumped 14,689.65 points or 60.89%. The index hit an all-time high of 40,124.96 points in morning trade on Thursday, amid trends pointing towards a thumping majority for Modi-led NDA in the general elections. The overall market capitalisation of BSE-listed companies has grown from a little over `75 lakh crore to `150.25 lakh crore during May 16, 2014–May 23, 2019 period. This represents an increase of `75.25 lakh crore.
At close of trade Thursday, the market valuation of BSE-listed firms was at `1,50,25,175.49 crore.

(with inputs from PTI)

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