Nifty hits new all-time high

Sensex closes above 30,000; optimism over new NPA policy takes banking index to a new high

The sharp rally in banking stocks pushed the benchmark Nifty to a new record high on Thursday. The 50-share index closed at 9,359, up 47.9 points, or 0.5 per cent. The Sensex gained 231.4 points, or 0.8 per cent, to close at 30,126, just eight points below its record high.  The broader markets, too, witnessed a similar trend with both the mid-cap and small indices closing higher by 0.5 per cent and 0.36 per cent, respectively.

The banking stocks rallied on the back of optimism about the government’s decision to bring an ordinance to empower the Reserve Bank of India (RBI) to effectively deal with bad loans. Shares of ICICI Bank rallied 9.2 per cent to end as the biggest gainer among the Sensex companies. Shares of Axis Bank and State Bank of India closed higher by 3.6 per cent and 3.2 per cent, respectively. The BSE Bankex, a gauge of banking stocks, soared 2.3 per cent to close at a new high of 25,831.

“Government is one step closer to new non-performing assets (NPA) policy. Banks are in a sweet spot due to a new framework to deal with NPAs and better quarter results. The (US) Fed kept the rates on hold amid slow pace in economic growth but the market is not expecting any deviation from two more hikes in this calendar,” said Vinod Nair, head of research, Geojit Financial Services. Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 601.1 crore on Thursday while the domestic institutions purchased shares worth Rs 926 crore, provisional data from the stock exchanges showed.

The recent leg of rallies in Indian equities has largely been on account of strong FPI flows. The overseas funds have purchased equities worth $6.2 billion so far from the Indian markets in the current fiscal year. Not just Indian markets, all the emerging markets have witnessed decent foreign flows in 2017. While South Korea saw overseas fund buying of $8 billion, Mexico saw flows worth $9.5 billion.

“Flows into EM (emerging market) equity funds revived from March 2016 and have continued to recover ever since. EM flow recovery has come largely at the expense of European funds which saw large outflows between February and December 2016, and are beginning to see some trickles of flows only recently,” said Manishi Raychaudhuri, Asia Equity strategist, BNP Paribas. 

The buoyancy in the EM flows would continue in the near- to medium-term, he said.

On Thursday, all the major global markets were also trading higher with the major European indices going up 0.5-2 per cent. This positive mood in the European markets is on hopes of a favourable outcome from the French elections. Experts say the victory of centrist presidential candidate Emmanuel Macron over right-wing opponent Marine Le Pen could allay the concerns of investors about a Brexit-like fallout in France.