Dalal Street bulls lift Sensex to 60k
- The BSE Sensex rose 163.11 points, or 0.27%, to 60,048.47. The National Stock Exchange’s Nifty gained 0.17% to close at 17,853.20.
India’s benchmark Sensex scaled the 60,000 mark for the first time on Friday, lifted by strong liquidity flows and investor optimism of a continued revival in the economy from the Covid-induced turmoil.
The BSE Sensex rose 163.11 points, or 0.27%, to 60,048.47. The National Stock Exchange’s Nifty gained 0.17% to close at 17,853.20.
Markets in other Asian-Pacific countries were mixed, with Japan’s Nikkei rising 2.06% while Hong Kong’s Hang Seng index declined 1.45%.
Piyush Garg, chief investment officer of ICICI Securities Ltd, said Indian stocks have been performing well over the past few quarters due to robust liquidity, upward earnings cycle and an economic revival led by a fading pandemic.
He, however, cautioned that investors should be wary of rising inflation and a subsequent squeeze on liquidity.
Garg said growing inflation risks and withdrawal of ultra-easy monetary policy by global central banks may trigger a sharp rise in bond yields and correction in riskier assets.
Indian equity markets have been scoring new highs in September despite periodic nervousness around China’s Evergrande debt defaults cascading to a global crisis and the Fed’s rate tapering decision. Though most analysts are confident that the rally would sustain, there are looming concerns over higher valuations.
“Economic growth is just beginning to turn around, and credit growth is seeing some stability. So, there is a large runway ahead for the long term. In the short term, frontline indices look a little heated on momentum readings. Also, when you score the markets cumulatively on historical valuation parameters, they are slightly stretched,” said Vinit Sambre, head-equities, DSP Investment Managers. Markets are trading nearly 20 times FY23 earnings.
Meanwhile, the India volatility index or India VIX rose 1.92% to 16.92 during the day. An increase in VIX indicates greater anxiety among market participants. However, brokerage Jefferies said domestic markets have remained extraordinarily resilient. It said the structural bull story remains in place with growing evidence that a new residential property cycle has begun after a seven-year downturn.
Besides the risk of another Covid wave, a key risk would be a change in the Reserve Bank’s dovish policy, Jefferies said. “But India also seems to be at a major inflection point in earnings with the corporate profits to GDP ratio bouncing off an all-time low of 1.2% in FY20 to an estimated 2.1% in FY21,” it said in a September 23 note.