Indian stocks scaled new peaks on Tuesday, with the Sensex closing at a record high of 61,872.99, up 248.84 points or 0.40%. The broader Nifty ended the session at 18,403.40, advancing 74.25 points or 0.41%, nearing its lifetime high of 18,477.05 reached on October 18, 2021.
The rally was driven by bank and auto stocks. The mood in the other Asian markets, too, was upbeat, with Seoul, Tokyo, Shanghai and Hong Kong posting significant gains.
Encouraging domestic inflation data and continuing foreign capital inflows boosted the sentiment which spilled over to the currency markets. The rupee ended at 81.1025 to the dollar, gaining 0.2% over Monday’s close of 81.2625. International oil benchmark Brent crude was trading 1.62% lower at $91.63 per barrel.
Madhusudan Kela, founder, MK Ventures, said India seems to be on a strong wicket despite global problems, and the currency and equity markets have consistently done well. “Whether it is the MSCI or geopolitical scenario, our weight seems to be on the rise. So, over the long run, we stand to gain immensely. Yes, there will be interim corrections, but no market crash,” Kela said.
Investors have been adding risk in the hope that interest rates will be hiked more slowly after consumer inflation for October came in at 6.77% y-o-y and the WPI fell to a 19-month low. Although India commands a huge premium to peer markets, investors believe the large local market will drive both consumption and credit. Valuations now are steep with little cushion for any shocks.
A Balasubramanian, MD & CEO, Birla SunLife MF, said the renewed interest in the equity markets comes on the back of the opinion that inflation is near its peak. “Monetary policy is likely to show less aggression and we may see only an incremental rate hike. This buoyancy will continue for some time,” he said.
Among the biggest drivers of the indices have been bank stocks as lenders are in a sweet spot where loan rates have gone up but deposit rates are beginning to rise. Moreover, after several years of clean-up, balance sheets are now stronger. The Bank Nifty closed at a record high of 42,400 on Tuesday.