Investors are looking forward to some form of a fiscal stimulus to boost growth and some policy thrust to revive investments after economic growth fell to multi-year lows.
The benchmark indices continued to rise on Thursday, with the Sensex crossing the 42,000-mark in intra-day trades following the initial trade deal between China and the US.
The broader market has joined the rally on Dalal Street, with both Nifty Midcap and Smallcap indices outperforming the benchmarks in 2020. While the Nifty Midcap surged 5.2% since January 1, Nifty SmallCap has gained 7.5% during the same period. In the same period, the benchmark Nifty gained just 1.5%.
All of the 19 sectoral indices compiled by BSE gained on Thursday, barring BSE Metal, BSE Oil & Gas and BSE Basic Materials.
Markets have shed fears over rising geopolitical tensions and oil prices and are pinning hope on some triggers that the government could announce in the Union Budget. The market is also focusing on third-quarter earnings as some of the heavyweights are due to announce their numbers for the quarter this week.
According to Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services: “We are witnessing sector-specific and stock-specific action as the third quarter earnings season progresses and as expectations to the run up to the Budget build-up for certain sectors.”
Investors are looking forward to some form of a fiscal stimulus to boost growth and some policy thrust to revive investments after economic growth fell to multi-year lows. Nomura expects a gradual recovery through 2020 with a lagged positive impact of monetary stimulus and policy thrust driving investment cycle. This recovery thesis is based on benign oil prices and supportive external environment.
High expectations from the Union Budget has further given legs to the rally this year. According to Gaurav Dua, senior V-P, Sharekhan, BNP Paribas, there is a growing demand for announcement of fiscal stimulus in the Union Budget.
“With RBI doing its bit by keeping the monetary stance accommodative and cutting interest rates sharply in 2019, the onus is also on the central government to provide fiscal support to the economy,” he said.
Both foreign and domestic institutional investors (DIIs) sold shares on Thursday. While foreign portfolio investors (FPIs) offloaded shares worth $56 million, local investors sold equities worth $26 million, provisional data on exchanges showed. However, so far in January 2020, the overseas investors have bought equities worth $ 286.6 million against DIIs selling of $139 million worth of shares.
At 41,932.56, the Sensex trades at a price-earnings multiple of 19.6 times one-year estimated forward earnings. This compares with 12 times for Kospi and 14.7 for Jakarta Composite. Russian and Turkish equities were the cheapest in the emerging market with a forward price-to-earnings ratio about seven times, Bloomberg data showed.