5 factors that lifted Sensex, Nifty to record closing on first day of FY18
By Amit Mudgill
NEW DELHI: The BSE benchmark on Monday climbed nearly 300 points to hit a record closing high of 29,910. The index broke its previous closing high of 29,681 and is now close to the psychologically important 30,000 mark.
NSE barometer Nifty50, on the other hand, hit a record high of 9,245, before closing the day 64 points, or 0.70 per cent, higher at a closing high of 9,237.
So what drove Monday’s bull run? Going by the buzz on Dalal Street, here is a list of five factors that lifted the market to record high.
Reform hopes: Market participants were optimistic as four GST bills that were passed in the Lok Sabha last week would be taken up for discussion in the Rajya Sabha this week.
Meanwhile, the Taxation Laws (Amendment) Bill, National Bank for Agriculture and Rural Development (Amendment) Bill, Constitution (One hundred and Twenty Third Amendment) Bill and National Commission for Backward Classes (Repeal) Bill will be taken up for discussion in the Lok Sabha this week.
Goldman Sachs has remained overweight on India as it felt that the medium-term growth and reforms story remained promising. The global investment firm expects the benchmark Nifty50 to reach 9,500 level in 12 months and 10,200 level by the end of 2018, as earnings growth gathers pace.
Strong institutional flows: While DIIs were net sellers of stocks to the tune of Rs 4,395 crore in March, FPIs infused a massive Rs 31,326 crore in domestic equities during the month, as the rupee strengthened and domestic political uncertainty and fears of protectionism under the Trump administration eased. In last week alone, institutional investors offloaded equities worth over Rs 14,000 crore.
“I am expecting fresh inflows to equities worth at least $100 billion from Indian households in next 18 months,” said Porinju Veliyath, Equity Intelligence India.
Sajjid Z Chinoy, Chief Asia Economist at JPMorgan, said: “We should be wary of these foreign portfolio flows. These risk-on and risk-off flows can easily reverse. But what is different this time around is the fact that I am a little a bit more comfortable with India being able to absorb these global shocks. A combination of comfortable BOP situation and higher forex reserves can keep India relatively insulated from global shocks compared with other emerging markets.”
Churn in leadership: Shares of select largecaps such as Reliance Industries (up 3.94 per cent) are clearly showing leadership. Four stocks – Reliance Industries, L&T (5.26 per cent), ICICI Bank (up 3.48 per cent) and HDFC (up 2.02 per cent) – together accounted for most of the index gains on Monday.
“When you have an index or a situation where there is continuous churn of largecaps rather than just one or two key sectors, it is a sign of healthy trend shaping up. In last couple of weeks, you had RIL breaching the Rs 1,300 mark and today you have L&T,” said Kunal Bothra, Independent Market Analyst.
Jaitley’s growth expectation: Finance Minister Arun Jaitley on Saturday said India’s GDP may grow 7.7 per cent in 2018, while global growth is expected to improve further in 2017-18. That said, emerging markets face newer challenges in the form of inward-looking protectionist policies and increased geopolitical tension, Jaitley said, adding that India needs $646 billion infrastructure funding over the next five years.
Rupee booster: Brokerage UBS said every 1 per cent appreciation in the rupee could lead to a 0.6 per cent cut in Nifty earnings. That said, in periods of rupee appreciating over 5 per cent, the return from the Nifty50 has been 20 per cent on an average, the brokerage said.
“However, the Nifty’s performance, in both absolute terms as well as relative to other emerging markets, is stronger in periods of rupee appreciation. There is circularity in this argument as flows into the equity market play a role in how the rupee moves. It also accentuates global investors’ returns in dollar terms,” it said.
“Historically, a 5 per cent-plus rupee appreciation in any six-month period has been associated with an average Nifty return of 20 per cent. The Nifty50 is up 6 per cent over the past two months,” the brokerage said .
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Via:: Economic Times – Stocks