 "Sensex versus Dow Jones")
Benchmark indices logged fresh record highs on Tuesday as foreign portfolio investors (FPIs) continued to pour money into domestic equities.
Gaining for the sixth straight session, the Nifty50 ended at 19,389 points, up 0.34 per cent, or 66 points, over the previous day’s close. The Sensex notched up its fifth daily advance, closing 0.42 per cent, or 274 points higher to close the day at 65,479 points. The 30-share index has added 2,509 points, or 4 per cent, in the past five trading sessions.
On Tuesday, foreign portfolio investors (FPIs) bought shares worth Rs. 2,134 crore while domestic institutional investors (DIIs) pared their holdings by Rs. 785 crore, as per provisional data provided by stock exchanges. FPIs had put in Rs. 52,366 crore ($6.4 billion) last month — the most since August 2022.
Tuesday's rally was backed by the financial sector with the Bajaj twins — Bajaj Finance and Bajaj Finserv — doing most of the heavy lifting. They alone added 172 points to the Sensex gains. Bajaj Finance ended the session with gains of 7.3 per cent while Bajaj Finserv rose 5.7 per cent. Bajaj Finance stock gained after the financial services major announced its assets grew by a record Rs. 22,700 crore during the June quarter of the 2023-24 financial year (Q1FY24).
From this year’s low in March, the Nifty50 and the Sensex have rebounded close to 15 per cent. For FY24, the gains stand at 12 per cent for the 50-share index and 10 per cent for the Sensex.
"Risks have subsided, particularly on the interest rate, monsoon and the GDP fronts. India has done a lot of groundwork in the past few years and that is expected to lead to higher economic growth in the coming 5-10 years. This seems to be getting recognised by investors," said Sanjay Bembalkar, co-head of equities, Union Mutual Fund.
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On the day, stocks in the mid-cap and small-cap space saw profit-taking. The BSE Smallcap ended with just 0.05 per cent gain, while the BSE Midcap index declined 0.22 per cent.
The combined market capitalization of all BSE-listed companies rose to Rs. 298.6 trillion from Rs. 298.2 a day earlier.
Experts said that traders took some money off the table as the week-long rally raised concerns around expensive valuations.
"The market is maintaining its optimism; however, a profit-booking tendency is visible at the upper band as the recent rally has raised the market to the historic new high range. The momentum of the market has shifted from the frontlines of this year to the laggards like IT, commodities, and PSU banks," said Vinod Nair, head of research at Geojit Financial Services.
The Nifty50 currently trades at 21 times its estimated earnings per share (EPS) for FY24. The index is estimated to log 16 per cent EPS growth during the ongoing financial year to Rs. 920 and another 13 per cent growth in FY25 to Rs. 1,040. Analysts expect the index to breach 20,000 by the end of this year.
“In the bull case, we value Nifty at 22 times which translates into a December’ 23 target of 22,200. Our bull case assumption is based on the overall reduction in volatility and the success of a soft landing in the US market. Currently, we are near the peak of the rate hike cycle and may expect only one rate hike in the US market before the US Federal Reserve takes a pause. If the market sails through the next one or two quarters smoothly, we would likely see the next level of triggers along with money flowing to emerging markets” said Axis Securities in a note.
