Sensex soars 834 points on US stimulus hopes

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January 20, 2021 3:30 AM

European markets in countries such as France, Germany and the United Kingdom up between 0.10% to 0.14%. Additionally, the Dow Jones mini futures was up by 200 points during the time of press.

Foreign portfolio investors bought stocks worth $2.9 billion so far in February, which have helped the market rally.Foreign portfolio investors bought stocks worth $2.9 billion so far in February, which have helped the market rally.

Indian equities on Tuesday recovered losses and ended the day higher. The Sensex is once again kissing distance away from the 50,000-mark, thanks to the synchronised market rally globally.

The Sensex rose by 834 points (1.72%) to close at 49,398.29 while the Nifty rallied by 239.85 points (1.68%) to close at 14,521.15. Investor sentiment remained upbeat on the hope of a bigger fiscal stimulus in the United States of America.

Foreign portfolio investors (FPIs) have continued to pump in capital into the Indian markets on account of the increased liquidity abroad after central banks decided to cut interest rates in the previous year. Since November, after the US elections the Indian markets have seen strong buying on the part of global investors with brokerages expecting it to continue in calendar year 2021 as well.

In January, FPIs have pumped in $2.5 billion and in the last two months, they have pumped in $16.4 billion. Domestic institutional investors (DIIs), however, have been selling stocks with the outflow in January standing at Rs 12,365.77 crore. The FPIs on Tuesday bought stocks worth $34.7 million whereas, the DIIs sold stocks worth Rs 199.3 crore.

U R Bhat, director, Dalton Capital Advisors, said, “From the size of the inflows that we are seeing in the last few days, it appears as if the enthusiasm of the FPIs is waning a bit. Whether this is a precursor to a change in the broad trend we have seen hitherto, only time will tell and this space needs to be closely watched.”

European markets in countries such as France, Germany and the United Kingdom up between 0.10% to 0.14%. Additionally, the Dow Jones mini futures was up by 200 points during the time of press.

Asian markets reacted to Janet Yellen’s announcement of a big stimulus push and benchmarks in Taiwan, South Korea and Hong Kong rose by 1.7% to 2.7%.
What contributed the most to the rally in the stock markets are the Nifty PSU Bank stocks, Nifty Metals, and Nifty Financial Services. Also, the market’s fear gauge which is the India VIX dropped by 6.13% to close at 22.9. The fear gauge has been rising in the last few trading sessions on account of the sell-off and weakness in the overall markets.

Experts believe that the markets have reached their full valuation and the risk-reward ratio is neutral. The markets have largely priced in the strong economic recovery, robust earnings growth in FY21 to FY23 with potential earnings upgrades and likely stable domestic bond yields for the next three to four quarters.

Kotak Institutional Equities, said, “Possible earnings upgrades and low bond yields may partly mitigate high absolute valuations.”

The biggest gainers on the Nifty were Bajaj Finserv, Bajaj Finance, Tata Motors, Hindalco and Sun Pharma up by 6.76%, 5.26%, 5.2%, 3.62% and 3.53% respectively. The biggest losers on the Nifty were ITC, Tech Mahindra, Britannia, as well as Mahindra and Mahindra down by 0.36%, 0.28%, 0.08%, and 0.05%.

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