Nifty crosses 10,000 mark; hits all time high

FIIs, MFs have invested Rs 80,000 cr since March 14, when the index closed above 9,000

The country’s benchmark indices hit new all-time highs on Wednesday, with the 50-share Nifty closing above the psychological 10,000-mark for the first time and the 30-share Sensex closing 0.48 per cent higher at 32,382. A rally in metal stocks and quarterly earnings optimism boosted sentiment. The Nifty ended the day at 10,020, up 56 points or 0.56 per cent.

On Tuesday, the Nifty had briefly crossed the 10,000-level but closed at 9964.55. 

Nifty’s journey from 9,000 to 10,000 took just 92 trading days. The latest 1,000-point (10.3 per cent) rally has been driven by robust investments from both foreign institutional investors (FIIs) and mutual funds (MFs). FIIs have invested Rs 38,000 crore, while MFs have pumped close to Rs 42,000 crore in equities since March 14, when the index closed above 9,000 for the first time.

“We believe the equity market is in a mid-cycle and recommend that investors continue to be overweight in equities. Markets are no longer cheap on PE basis; reasonable growth is expected from equity markets over the next two-to-three years,” said S Naren, executive director and chief investment officer, ICICI Prudential Asset Mangement Company. 

“However, in the interim, volatility cannot be ruled out owing to various domestic and international factors. Therefore, it is imperative to be conservative in one's investment approach in the current market scenario,” Naren added.

The benchmark indices have returned close to 22 per cent returns this calendar year, in line with the rally in the MSCI Emerging Markets Index.

While the goods and services tax (GST) could be marginally disruptive in the near term, analysts are hopeful that earnings growth will pick up in the coming quarters.

According to Morgan Stanley analyst Ridham Desai, a U-shaped recovery may be on the cards, driven by domestic and global factors. 

“We expect earnings revision breadth to improve in the next few months and a Sensex earnings growth of 18 per cent in FY18 and 24 per cent year-on-year in FY19,” Desai said.

Naren believes that the earnings recovery trend can be aided by a low base effect, driven by lower interest rates and increased government spending on priority investment areas.

Those in the bear camp, however, are advising investors to exercise caution. The equity markets globally could see some volatility going ahead, they said, given the high returns and the growing concerns related to expectation of the central bankers in the developed markets curtailing easy liquidity.

“It has been more of a global rally, and India has got its fair share of foreign inflows during the past seven months,” said Jaideep Arora, chief executive officer, Sharekhan, a leading domestic brokerage. 

“The sentiment towards India could be dented if the much-awaited revival in corporate earnings does not materialise in the coming quarters. It would be advisable for investors to invest systematically in carefully selected stocks and keep some powder dry to take advantage of corrections or pullbacks,” he said.

FPIs have shopped for stocks worth Rs 1,471 crore in July, taking their year-to-date purchases in equities to nearly Rs 57,000 crore. Domestic institutions, on the other hand, bought shares worth Rs 3,200 crore in July with year-to-date purchases of Rs 23,422 crore.

“Markets continue to touch new highs, giving investors little time to take stock of their portfolios. Globally, investors are a bit cautious as they await the outcome of a two-day US Federal Reserve's policy meeting. Markets will be watching for any indication of another possible rise in the benchmark lending rate in 2017, and on when the Fed will begin winding down its multi-trillion-dollar investment holdings,” said Karthikraj Lakshmanan, senior fund manager – equities, BNP Paribas Mutual Fund.

The NSE had launched its flagship 50-share index on April 21, 1996 with a base value of 1,000, and 1995 as the base year.

In terms of calendar year returns since 1996, the Nifty has clocked gains of over 50 per cent in four calendar years and more than 30 per cent in seven calendar years. The Nifty has fallen by over 20 per cent in two calendar years, giving positive returns in 15 out of 23 years, data provided by IISL, a subsidiary of the NSE, show.