Equity indices leapt to new highs on Monday with the exit polls for the 2019 general elections predicting a strong comeback for the incumbent BJP-led NDA government. Interestingly, foreign portfolio investors (FPI) were back in buy mode, picking up shares worth nearly $250 million, provisional data from the exchanges showed. FPIs have been sellers for much of May and had offloaded stocks even last Friday when the markets had rallied smartly.
Investors shrugged off concerns on poor corporate earnings and macro headwinds, including the US-China trade war and elevated crude oil prices. Factory output for March contracted by 0.1% though consumer inflation for April came in at a soft 2.9%. For a universe of 608 companies (excluding banks and financials), net profits for the three months to March fell 15.2% year-on-year on the back of a revenue growth of 11.7% y-o-y. Excluding Reliance Industries and TCS, the net profits for the sample were down 22% y-o-y with revenues up just 10.3% y-o-y.
While the Sensex rallied 1,421.9 points on Monday, the broader Nifty surged 421.1 points to mark their biggest single-day points rally in the last ten years. Both indices gained 3.7% each to close at their fresh life-time highs of 39,352.67 and 11,828.25 points, respectively. While 66 stocks on the BSE hit a 52-week high, 151 others hit one-year lows. Meanwhile, the rupee appreciated the most since December to close at 69.74 against the US dollar and the yield on benchmark 2029 bonds slid eight basis points to 7.29%.
Monday’s rally added Rs 5.24 crore to investor wealth, taking the combined market capitalisation of the BSE-listed companies to Rs 151.83 lakh crore. The rally was broad-based with gains spread across the sectors with BSE Capital Goods index gaining as much as 5.6%. The Nifty mid-caps and Nifty small-cap also gained over 4% each. The Bank Nifty rallied a remarkable 1,309.55 points or 4.5% to close at a highest ever points of 30,759.70. With Monday’s surge, the Sensex has added about 2,238 points in the last three sessions.
Overseas investors have picked up stocks worth over $9.4 billion so far in 2019, against last year’s outflow of $4.6 billion. On the other hand, the domestic institutional investors (DIIs) have sold shares worth $1.2 billion between January and now, Bloomberg data showed.
India remains one of the most expensive markets in the world. At its close of 39,352.67 on Monday, the Sensex now trades at a price-earnings (PE) multiple of 18.6 times to the estimated one- year forward earnings, against the long-term average PE of 16.7 times. This compares with 10.8 times for Kospi and 13.6 for Jakarta Composite. Russian and Turkish equities were the cheapest in the emerging markets with a forward price-to-earnings ratio of 5.7 and 5.3, respectively, Bloomberg data showed.
Historically, Indian equities have traded at an average PE premium of 26% to the Asia pacific region, excluding Japan. Of the 19 sectoral indices in the BSE, all ended the day in green with BSE Industrial, Capital Goods and Realty gaining as much as 5.5% each. The overall breadth of the market was sharply positive, with 1,998 gainers against 631 losers on the BSE. On the NSE, 1,513 stocks ended in the green against 330 stocks closing lower.