The Sensex on Monday crossed the 52,000-mark for the first time amid huge investments by foreign portfolio investors (FPIs) in global equity markets.
The 30-share index gained 609 points, or 1.2 per cent, to end the session at 52,154. The Nifty50 rose 151 points, or 1 per cent, to end the session at 15,314. So far this month, both benchmark gauges have rallied close to 13 per cent, supported by sustained FPI flows.
Overseas investors bought shares worth Rs 1,234 crore on Monday, taking their month-to-date buying tally past the Rs 20,000 crore. The unprecedented foreign inflows into the equity markets is a global phenomenon with most markets recording new lifetime highs.
According to reports, investors pumped a record $58 billion into equities last week. A BofA note said about 63 per cent of assets under management at its private bank, which serves wealthier clients, were now allocated to stocks. And allocation to equities is at an all-time high.
Analysts said historically low-interest rates and hopes of a huge recovery in global economic growth had whipped the appetite for riskier assets.
The rollout of vaccines has kindled hopes of an economic recovery. Investor bullishness has also been driven by hopes that US President Joe Biden’s $1.9-trillion stimulus proposal will help the country recover from the coronavirus-triggered economic crisis.
The rally in the bond markets has led to yields falling to historic lows and pushed investors to shift money to risky assets. Analysts said the reflation trade is set to continue amid vaccine rollout and spending by governments globally.
“The market rally has been very strong and India has multiple triggers which include — contained Covid infections, blockbuster Budget, and economic revival. Overall, the market will continue to do well over the medium term. Risks are now more global than local,” said Naveen Kulkarni, chief investment officer, Axis Securities.
Better-than-expected earnings posted by Indian firms in the December quarter also boosted sentiment. Many big companies have reported high double-digit growth in earnings. The rally also coincided with increased participation of retail investors. “Indices keeps rising, reflecting pent-up buying and partly driven by encouraging results. Selective buying in sectors means that overall volumes are measured, and the advance-decline ratio also is either flat or negative,” said Deepak Jasani, head of retail research, HDFC Securities.
However, continuing government spending has raised concerns about inflation, and analysts have flagged worries about stretched valuations. “With the markets are at all-time highs and discounting a large portion of an earnings recovery, a broad-based rally may not happen here on,” said Binod Modi, head strategy, Reliance Securities.
On an overall basis, 304 stocks hit their 52-week highs, and 367 were locked in the upper circuit on Monday. The market breadth was negative with total advancing stocks at 1,365 and those declining at 1,674. Two-thirds of Sensex components ended the session with gains.
Axis Bank was the best-performing Sensex stock and rose 5.8 per cent. ICICI Bank rose 4 per cent. Bajaj Finance and SBI rose more than 3 per cent.
Dr Reddy’s and TCS were the worst-performing Sensex stocks, which ended the session with losses of 1.7 per cent and 1.6 per cent, respectively.
All the BSE sectoral indices, barring seven, ended the session with gains. Banking and finance stocks rose, and their gauges rose 3.3 and 2.7 per cent, respectively.
“In our view, India appears to be in a sweet spot as of now, led by many tailwinds, which should continue to offer sustained corporate earnings rebound. A sharp improvement in corporate earnings and visibility of sustaining the momentum led by higher capital expenditures allocated in the Union Budget augur well for the market in the long run. However, higher Brent prices and hardening of bond yields across global markets may be near-term concerns,” said Modi.