Equities continued to set new records, with benchmark indices Nifty and Sensex on Tuesday hitting key milestones of 26,000 and 85,000 points, respectively, during intra-day trading.
The continued optimism over the US Federal Reserve’s aggressive interest rate cut, stimulus measures announced by China to boost its economy and strong domestic liquidity buoyed the momentum.
However, the indices pared gains amid likely valuation concerns and escalating geopolitical crisis in the West Asia. The Nifty ended at 25,940.40 points and the Sensex closed at 84,914.04 points.
“The current rise in equities can be attributed to the US Fed’s 50-bps rate cut and expectations of a rate cut by the RBI in the October MPC,” said Naveen Kulkarni, chief investment officer at Axis Securities PMS. “Valuation-wise, Indian equities are expensive compared to most emerging markets, but this is expected to continue as India offers the best long-term growth prospects and scale benefits.”
Sorbh Gupta, senior fund manager – equity at Bajaj Finserv AMC, said: “Clearly, there is some froth in the broader market. But within large-caps, we can still find some pockets of valuation comfort. If you look at one-year forward price-to-earnings multiple of the Nifty, it is not very expensive.”
Gupta said geopolitical tensions in the West Asia and China growth concerns are not incrementally new for the markets. However, if the stimulus measures work, it is good for global growth and some commodity stocks.
Kulkarni said although geopolitical challenges pose concerns, inflation remains benign. “Crude oil prices have been stable, indicating that the market is not overly concerned about these risks.”
The Nifty took 37 days to move from 25,000 to 26,000-point level, a slower 1,000-point journey compared to its previous two 1,000-point rallies.
Bajaj Auto, Shriram Finance and Bharti Airtel are the major gainers in the Nifty’s rally from 25,000 to 26,000 points.
In the broader market, the BSE midcap index ended 0.2% higher while the smallcap index ended flat. Overall, the investor wealth rose marginally to Rs 476.08 trillion.
While the Sensex has risen nearly 18% so far in 2024, the BSE midcap and the smallcap indices have sharply outperformed by rising around 34% each.
(Data contribution by Kishor Kadam)