Driven by sustained rally in the last four sessions, Indian equity benchmarks - the BSE Sensex and NSE Nifty – touched their fresh lifetime highs in early trade on Friday. The 30-share BSE Sensex started the first trading day of December month on a strong note and surged 525 points, or 0.78%, to touch its new record high of 67,514 level, while the broader NSE Nifty jumped 144 points, 0.7%, to scale a new peak of 20,277 mark.
In the last four sessions, the benchmark indices have risen nearly 2.4%, while they climbed over 6% in November. In the last one year, the Sensex delivered 6.7% returns whereas the broader Nifty50 soared 7.7% during the same period.
The combined market capitalisation (m-cap) of all listed companies on the BSE crossed a record $4 trillion (around ₹333 lakh crore) for the first time on the back of sustained rally, with the Sensex rising 10.4% in the calendar year 2023, resulting in a gain of over $600 billion. The m-cap of companies listed on the BSE touched the $1 trillion mark in May 2007, followed by $2 trillion in July 2017, and $3 trillion in May 2021.
What fuelled market rally today?
The market sentiment got a lift today as firm global cues as well as strong macro data boosted investors’ appetite for equities across sectors, indicating their growing confidence in the India growth story and its attractiveness as an investment hub. Investors cheered higher-than-expected 7.6% GDP growth in the July-September quarter. At the same time, continued expansion in manufacturing sector activity as indicated by the S&P Global Purchasing Managers' Index (PMI), which rose to 56.0 in November, also painted a rosy picture of Indian economic growth.
The sentiment was further boosted after exit poll results indicated that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) had an edge over the opposition in two key state assemblies - MP and Rajasthan - raising hopes of political stability after the General elections.
Sector-wise, defence stocks witnessed a surge in buying after the Defence ministry approved acquisition proposals worth ₹2.23 lakh crore to enhance the operational capabilities of armed forces. Auto stocks also saw strong volume as they released their monthly wholesale figures for November 2023.
What lies ahead for the market?
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, says that the market momentum which pushed the Nifty up by 6% in November is likely to be sustained following strong macro data and positive news.
“First, the Q2 FY24 GDP growth rate at 7.6% has surpassed expectations. Particularly, the 13.9% growth in manufacturing and 13.3% growth in construction are impressive numbers. This has the potential to push the FY24 GDP growth rate to above 6.8%, significantly higher than the RBI’s projection of 6.5%. Second, the exit polls results indicate a high possibility of political stability after the General elections. The market will appreciate this,” he says.
“Since manufacturing and construction have done well, the bulls will focus on capital goods stocks like L&T and construction-related stocks. Cement stocks may attract renewed buying interest. Autos will continue to do well. Nifty is set to move to record highs," Vijayakumar adds.
Parth Nyati, Founder of Tradingo, says the Indian equity market may continue its momentum and outperform other global peers, backed by the strong fundamentals and under-ownership of foreign institutional investors (FIIs). In terms of level, 21,000 looks like an easy task in the near term for the Nifty.
“FIIs may become net buyers amid rising U.S. bond yields and the strong macroeconomics of India. State election results may create some kind of volatility, but we are preparing ourselves for a pre-election rally,” Nyati says.
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