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The equity benchmarks soared to new highs on Thursday, buoyed by the Reserve Bank of India’s (RBI) record surplus transfer to the government. The markets were further bolstered by robust foreign portfolio investor (FPI) inflows and easing election-relation jitters.
Both Sensex and Nifty 50 outstripped their previous records set on 10 April. Also, the combined market capitalisation of all NSE-listed companies breached the $5 trillion mark (Rs 417 trillion) on a closing basis, a day after the BSE-listed firms jointly reached this milestone.
The Sensex ended the session at 75,418, marking a gain of 1,197 points or 1.61 per cent — its most substantial rise since March 1. The broader Nifty 50 continued its upward trajectory for the sixth consecutive session – its longest winning streak since February 20 — ending at 22,968, up 370 points, or 1.6 per cent, the best since January 29.
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On April 10, the Sensex had settled at 75,038, while the Nifty 50 ended at 22,754.
According to provisional data from exchanges, foreign portfolio investors (FPIs) net purchased shares worth Rs 4,671 crore on Thursday — the highest this month.
Banking stocks were a significant contributor to the Sensex gains, accounting for more than a third of the increase. These stocks benefitted from the RBI’s record Rs 2.11 trillion dividend to the government for 2023-24, which led to a softening of bond yields and raised hopes for Treasury gains. The 10-year Indian bond yield slipped below the 7 per cent mark on Wednesday (the currency and debt markets were closed on Thursday).
This was significantly above analysts’ and the government’s expectations of Rs 1.02 trillion and is expected to provide the government with more room for its spending requirements and reduce the fiscal deficit.
Sarvjeet Singh Virk, co-founder & MD of Shoonya by Finvasia, said: “It will allow for an additional 0.3 per cent of GDP fiscal room for the government. This will enable the government to reduce its fiscal deficit and increase infrastructure spending. This is a major macro factor boosting investor confidence, and bodes well for the medium-to-long-term horizon.”
Prime Minister Narendra Modi’s assertion that the Bharatiya Janata Party (BJP) will win the Lok Sabha elections by record numbers and the stock market will hit new highs also enthused investors. Modi’s statement came in an interview with a newspaper, in which he said the National Democratic Alliance (NDA) has crossed the majority mark after the first five phases and the ruling coalition is getting stronger after each phase.
The prime minister’s assertion that the equity markets are rallying follows assurances by three senior Cabinet ministers regarding the stability of the markets.
Indian equities have been turbulent since the elections began on April 19, amid concerns that the ruling NDA may struggle to get the required numbers to carry out the far-reaching reforms the markets have been expecting. India Vix, a gauge of market volatility, has gained 50 per cent since the beginning of the Lok Sabha elections.
Investors have been concerned that the current government’s efforts to formalise the economy and measures like a cut in corporate tax in 2019, which benefited the markets, will lose momentum if there is a regime change or if the current regime returns with reduced numbers.
Neeraj Chadawar, head of fundamental and quantitative research at Axis Securities, said: “If the election outcome aligns with the current market expectations, we expect the Nifty 50 to reach fresh new highs in the first week of June. We recommend investors stay invested in the market and but also maintain good liquidity to take advantage of any market dips.”
The market breadth was mixed, with 2,071 stocks declining and 1,762 advancing on the BSE. More than four-fifths of Sensex stocks gained. Adani group stocks rose anywhere between 1 per cent and 8 per cent, and the group's market capitalisation increased by Rs 63,282 crore.
