Indian markets kick-start New Year at a record high
Indian markets kick-started the year 2021 on a positive note with both benchmark indices closing at record highs on Friday. Expectations of an economic recovery and earnings revival in the year ahead have bolstered overall investor sentiment. The Nifty ended above the 14,000-mark for the first time at 14,018.50, up 36.75 points or 0.26%. The BSE Sensex closed at 47,868.98, up 117.65 points, or 0.25%.
Most global markets were closed for the New Year holiday, but there was an overall widespread positive sentiment on the back of the fresh US stimulus, the Brexit deal, and expectations that the vaccine roll-out will bring better days.
“The Sensex posted its ninth straight week of gains, its longest gaining streak since April 2010,” Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services Ltd, said.
The markets momentum seen in the last couple of months is likely to continue on strong global cues, sustained foreign inflows, and improving macros trends, Khemka said. The December quarterly results and the Union budget will be some of the key events for the market, he added.
Stock market sentiment was also buoyed by the record gross goods and services taxes (GST) collections in December, which suggest continued recovery in economic activity and the gradual return to normalcy. Gross GST collections touched ₹1.15 trillion last month, the highest-ever since the implementation of the new tax regime, according to the Union finance ministry.
Despite high volatility and an economic slowdown, Indian markets ended 2020 with 15-16% gains, while the BSE Midcap and BSE Smallcap outperformed, rising 18-29% during the year.
The markets may behave differently in the first and second halves of 2021, according to Jaideep Hansraj, managing director and chief executive, Kotak Securities. “We can expect Nifty to go anywhere between 14,000 and 15,000 sometime in the first quarter of CY21. Post-budget and the Q4 results season we expect markets to go into some kind of consolidation phase and witness time correction,” he said.
Abundant liquidity, low-interest rates and capital flows are likely to support the markets, analysts said. However, steep valuations may pose a threat to the overall rally of Indian markets, they said.
The continuation of low or zero interest rates globally can keep pushing valuations higher for the world and for India, said Dhiraj Relli, managing director and chief executive, HDFC Securities.
A large portion of the markets run-up is over and, from now on, its rise (if substantial) would be gradual and measured, Relli said. “In the interim, we may see bouts of correction, especially if FPI flows dry up for a couple of days/weeks,” he said.