Sensex, Nifty at fresh highs: What are the factors and how sustainable this is?
The markets closed at a new high on Friday, with the BSE Sensex gaining 277.41 points or 0.48 per cent to end the day above 58,000 for the first time ever. Nifty also rose by 89 points or 0.52 per cent to close at 17,324.
Investors' wealth rose by ₹4 lakh crore in two days of market rally to reach its fresh all-time high of ₹2,54,21,578.88 crore.
In the previous session, the BSE Sensex had rallied 514.33 points or 0.90 per cent.
So what are the factors driving the surge?
Analysts believe their are five main factors behind the rise of the Sensex and Nifty. These are: Strong earnings reported by companies, reopening of businesses as second wave receded, record pace of vaccinations, hopes of delayed taper of US Fed asset purchase and strong purchasing managers' index (PMI) and healthy GST numbers.
"The comments by US Fed chairman that the US central bank won't be in a hurry to raise rates supported global markets. Indian markets received further support from increased vaccination pace and decent July 2020 GST collections," said Shrikant Chouhan, executive vice president, Equity Technical Research, Kotak Securities.
How sustainable is this surge?
According to analysts, it is right now a bull market and these typically can surprise on the upside. Some of them, however, say that the trajectory could slow in the second half of the financial year, while others still foresee a correction.
"The markets are currently discounting a fair bit of the earnings story, and the margin of safety is increasingly reducing; any disappointment on the earnings front, on account of slower-than-expected demand recovery or higher-than-expected margin pressure, could lead to a contraction in market valuations," Unmesh Kulkarni, MD and senior advisor, Julius Baer India, told news agency PTI.
The BSE benchmark had on August 31 scaled the 57,000 mark for the first time. It soared over 9 per cent last month.
Reliance Industries was the biggest gainer in the Sensex pack on Friday, with a gain of over 4 per cent, followed by Titan, Tata Steel, Asian Paints and Maruti.
Hindustan Unilever Limited (HUL) and Bharti Airtel were among the laggards.