Sensex scales record high, hits 30,000

Strong macro, robust flows, positive global cues spark rally; Q4 earnings to determine future course

The BSE’s bellwether index, Sensex, scaled a record high on Wednesday, closing at 30,133 points — 190 points or 0.6 per cent higher than the previous day. 

The Sensex has crossed the 30,000-point twice in intra-day trade previously — in March 2015 and in April 2017. This is the first time it closed above 30,000. 

The National Stock Exchange’s Nifty50, too, posted a record high for a consecutive day, gaining 45.2 points or 0.5 per cent on Wednesday to close at 9,315.8. 

The Sensex has rallied 13.2 per cent in 2017 so far. A stronger rupee has helped India register impressive gains in dollar terms as well. The Sensex is up 20 per cent in dollar terms, outperforming all major global indices.  

“Indian equities have been riding high in the recent past due to positive environment both on domestic and global fronts. While the institutional flows have been strong, even the appetite of retail investors has improved. Market fundamentals are robust and the medium- to long-term expectations are extremely positive. India will be the best bet among emerging markets for the next few years,” said Arindam Chanda, head, IIFL Broking.

While the outlook remains positive, experts warn that the current rally is not yet supported by earnings growth. It has been subdued for the past three years because of a fall in commodity prices and increase in credit cost for the banking sector. 

A revival in earnings for the fourth quarter results of FY17 would be crucial in determining market direction over the near term. 

“Earnings play a crucial role in sealing the fate of markets. While the markets have already shot up anticipating a revival in earnings, if the expectations are not realised, the markets could lose support,” said U R Bhat, managing director, Dalton Capital Advisors India.

 

The current rally has been supported by strong flows from foreign and domestic institutions. Foreign portfolio investors (FPIs) have purchased equities worth Rs 42,886 crore till date this year, while domestic mutual funds have shopped shares worth Rs 17,800 crore, data showed.

ITC, which went up 3.3 per cent, was the best performing stock among the Sensex companies on Wednesday. Shares of Mahindra & Mahindra and Housing Development Finance Corporation rallied 3.3 per cent and 2.3 per cent, respectively. 

 

The BSE 500, which is a gauge of broader markets also closed at an all-time high, as did the BSE 100 and BSE 200 indices. 

However, the mid-cap and small-cap indices which made new highs in intra-day trades could not sustain the gains and ended 0.1 and 0.6 per cent lower, respectively. On the BSE, shares of 952 companies registered gains against declines posted by 1,954 companies. 

FPIs sold equities worth Rs 492 crore on Wednesday while the domestic institutions bought shares worth Rs 1,011 crore, provisional data from the BSE showed.

Market participants say Indian equities are currently in a “sweet spot” as both the domestic and global triggers are looking positive. On the international front, the fears of a Brexit-like fallout in France seem to have been allayed for the time being with centrist Emmanuel Macron winning the first round of polls. Concerns over Trump administration’s protectionist agenda have also cooled down as the new government has not undertaken any major adverse decisions yet. Back home, while the monsoon is expected to be normal, the economy also seems to be on a strong footing.

“The Sensex, today (on Wednesday), touched the 30,000 level in anticipation of strong economic and earnings growth going ahead. The economy is on a strong footing with relatively strong macroeconomic fundamentals. Also, factors such as structural shift towards digitisation of the economy coupled with increased focus on channelisation of financial savings, are expected to keep the financial market buoyant for the next three to five years,” said Pankaj Pandey, head of research, ICICI Securites.