The benchmark Sensex index crossed 35,500 on Thursday, just a day after breaching the psychological mark of 35,000 on Wednesday, gaining as much as 736 points in 2 days. Dalal Street extended its jubilation on Thursday with Sensex amassing 736.31 points in two days to hit an all-time high of 35,507.36. Earlier yesterday, the headline indices Sensex and Nifty closed at record high levels following a surge in banking stocks led by the news of government borrowing requirement being cut. The 30-share barometer Sensex closed at a fresh high of 35,081.82 points, up by 310.77 points. Interestingly, Sensex took 18 sessions to climb 35,500-mark from a level of 34,000 reached on 26 December. We take a look at seven reasons which helped Sensex to climb 35,500-mark.
Government borrowings slashed
Indian equities extended the bull run led by Narendra Modi government’s decision to bring down on additional borrowing requirement for the current fiscal to Rs 20,000 crore from Rs 50,000 crore. The government is expecting more transfers of surplus cash from the Reserve Bank in the fiscal ending 31 March 2018. Earlier in December last year, the government announced that it would make an additional borrowing of Rs 50,000 crore during 2017-18 through dated securities. “Requirement of additional borrowing being reduced from Rs 50,000 crore as notified earlier to Rs 20,000 crore,” Economic Affairs Secretary Subhash Chandra Garg tweeted.
100% FDI in private banks
FDI (foreign direct investment) limit in private banks could be raised to 100% from the current permissible limit of 74%. “The government is thinking of allowing 100% foreign direct investment in private banks,” CNBC-TV18 reported citing unidentified sources. “Increasing the permissible limit for FDI in public sector banks to 49% from the current 20% is also being considered, CNBC-TV18 report added. Following the news report, shares of heavyweight banking stocks such as HDFC Bank, State Bank of India, Yes Bank, IndusInd Bank, ICICI Bank, Kotak Mahindra Bank, Punjab National Bank rallied up to 4% in today’s trade.
Q3 earnings optimism
The optimism has been building over Q3 earnings of heavyweight bankers such as HDFC Bank, Kotak Mahindra Bank, Yes Bank. Investors are banking on third-quarter corporate earnings as most of the blue-chip companies have reported better-than-expected Q3 results including India’s second-largest IT firm Infosys. Shares of Adani Ports, Bharti Airtel, UltraTech Cement and Yes Bank will be in close watch ahead of their respective third-quarter earnings scheduled for later today. Other major companies which are also lined up with Q3 earnings are Deepak Nitrite, Adani Enterprises, Cyient, DB Corp, Hindustan Zinc, Mastek, and Zensar Technologies.
The FII (foreign institutional investors) are continuously pumping money in domestic equities after an extended sell-off between the months of August 2017 and December 2017. As per the data available at the exchanges, up until 17 January, FIIs bought equities worth around Rs 2,100 crore. During the tenure of August to December 2017, FIIs remain on a perpetual exit mode, selling around a net of Rs 67,500 crore worth of shares in the corresponding period. Yesterday only, foreign investors bought stocks worth Rs 625.13 crore on a net basis, while domestic institutional investors purchased shares for an amount of Rs 168.61 crore, according to the provisional data on the stock exchange.
Wall Street at records
Asian equities including Indian markets broadly follows the American stock market. Wall Street had also been on a continuous uptick since last year with the key equity index Dow Jones zooming past 26,000-mark from a level of around 18,000 in mid-November 2016. The major index of New York Stock Exchange, Dow Jones Industrial Average had added over 8,000 points in last 14-month period.
Earlier yesterday, US stocks jumped with the Dow Jones closing above 26,000 for the first time as investors’ expectations for higher earnings lifted stocks across sectors, Reuters said in a report. The Dow Jones Industrial Average rose 322.79 points, or 1.25% to 26,115.65, the S&P 500 gained 26.14 points or 0.94% to 2,802.56 and the Nasdaq Composite added 74.59 points or 1.03% to 7,298.28.
On the back of aforementioned driving factors, a value buying was seen in the shares heavyweight blue-chip stocks of companies such as HDFC Bank, HDFC, ITC, ICICI Bank, L&T, Maruti Suzuki, Yes Bank, IndusInd Bank, Kotak Mahindra Bank and Axis Bank. Collectively these 10 stocks alone contributed heavily in the Sensex up move, alone adding about 440 points to the index. Shares of India’s most valuable lender HDFC Bank surged 3% to hit an all-time high of Rs 1,947.4 while the stock of India’s largest housing financier HDFC rose 3.2% to a lifetime high of Rs 1,918.65.
Shares of Yes Bank advanced as much as 4.23% to the day’s high of Rs 356.9 as the fifth-largest private sector lender is all set to announce the third quarter results later today. The stock of ICICI Bank and Axis Bank hit their respective 52-week highs rising by 1.52% to Rs 353.2 and 2.02% to Rs 597.15 on NSE. The benchmark Sensex rose 284.63 points or 0.81% to began at 35,366.45 whereas the wider share indicator Nifty advanced 84.85 points or 0.79% to start at 10,873.4.
Sharp rise in HDFC Bank
Shares of HDFC Bank occupies a big weight among the 31 components of Sensex, which implies a little movement in the share price of HDFC Bank will relatively have more impact on Sensex. The stock of HDFC Bank surged as much as 3.31% to a record high of Rs 1,953.75 on BSE while the stock rose 3.35% to a lifetime high of Rs 1,954 on NSE. Following a sharp spike in the share prices of HDFC Bank, India’s most valuable private-sector lender HDFC Bank added as much as Rs 16,227.12 crore to Rs 5,06,045.4 (at an all-time high price of Rs 1,953.75) in the market capitalisation from Rs 4,89,818.28 as per the closing price of Rs 1,891.1 as on Wednesday. HDFC Bank on Thursday became the third Indian company to enter Rs 5 lakh crore market cap club.