Mumbai: The domestic equity benchmarks, BSE Sensex and NSE Nifty, scaled fresh record highs in early trade on Monday, driven by strong foreign fund inflows and positive cues from Asian markets. The 30-share Sensex jumped 318.58 points to reach an all-time high of 84,862.89, while the Nifty surged 120.75 points to hit a new peak of 25,911.70. Key gainers included Mahindra & Mahindra, Bharti Airtel, and Tata Steel, while ICICI Bank and HCL Technologies lagged. Robust buying by Foreign Institutional Investors (FIIs), who purchased equities worth Rs 14,064.05 crore on Friday, fueled the rally. Optimism was further boosted by the U.S. Fed’s recent 50 bps rate cut and dovish outlook, which injected fresh momentum into the markets. Asian indices such as Seoul, Shanghai, and Hong Kong also traded higher, reflecting global risk-on sentiment. Brent crude edged up 0.75% to USD 75.05 per barrel, adding to the positive market sentiment.
Mumbai: Domestic equity markets surged to new record highs in early trade on Monday, with benchmark indices BSE Sensex and NSE Nifty touching unprecedented levels, buoyed by robust foreign fund inflows and a rally in Asian markets. The BSE Sensex climbed 318.58 points, reaching an all-time high of 84,862.89, while the broader NSE Nifty jumped 120.75 points to set a new record high of 25,911.70. The positive sentiment was fueled by a combination of favorable global cues, including strong performances in major Asian markets and supportive actions from the U.S. Federal Reserve.
Market Highlights
The rally was broad-based, with several heavyweight stocks contributing to the upward momentum. Among the top gainers on the Sensex were Mahindra & Mahindra, Bharti Airtel, NTPC, State Bank of India, Kotak Mahindra Bank, Adani Ports, Tata Steel, and Tata Motors. These stocks benefited from strong buying interest as investors sought opportunities amid a globally bullish outlook. On the flip side, ICICI Bank, HCL Technologies, JSW Steel, and ITC were among the few laggards, facing some profit-booking after recent gains.
Factors Driving the Market Rally
1. Strong Foreign Institutional Investor (FII) Inflows: A key driver of the market’s rise was the substantial inflow of funds from Foreign Institutional Investors (FIIs). On Friday, FIIs purchased equities worth Rs 14,064.05 crore, indicating strong foreign interest in the Indian market. This influx of funds has provided a significant boost to market sentiment, driving both large-cap and mid-cap stocks higher.
2. U.S. Federal Reserve Rate Cut and Dovish Commentary: The recent 50 basis points (bps) rate cut by the U.S. Federal Reserve played a pivotal role in lifting global equity markets, including India’s. More than the rate cut, it was the Fed’s dovish commentary that reassured investors. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the Fed’s optimistic outlook provided the “charging bull” with a renewed sense of vigor, pushing markets sharply higher. The rate cut has made equities more attractive relative to bonds, leading to increased buying interest in stocks.
3. Positive Cues from Asian Markets: The bullish trend in Indian markets was further supported by gains in Asian counterparts. Key indices in Seoul, Shanghai, and Hong Kong were trading higher, reflecting a broader regional optimism. Investors cheered signs of economic stability and growth prospects in these markets, which added to the positive momentum in India.
4. Domestic Economic Resilience: Despite global economic uncertainties, India’s domestic economic indicators have shown resilience. Strong corporate earnings, steady growth in key sectors, and the government’s continued focus on economic reforms have bolstered investor confidence. Additionally, expectations of favorable government policies to support growth have kept the market mood upbeat.
5. Robust Performance of Sectoral Indices: Sectoral indices, particularly those linked to banking, automobiles, and metals, performed strongly. The rally in bank stocks, led by State Bank of India and Kotak Mahindra Bank, was driven by expectations of improved asset quality and credit growth. The auto sector saw gains on hopes of robust sales numbers, while the metals sector benefited from rising commodity prices.
Detailed Analysis of Major Movers
– Mahindra & Mahindra: The stock surged as investors bet on strong growth prospects in the automotive and agricultural sectors. The company’s recent initiatives to expand its electric vehicle portfolio have also attracted positive attention from investors.
-Bharti Airtel: Bharti Airtel continued its upward trajectory, driven by strong operational performance and a positive outlook on subscriber growth. The company’s expansion in the 5G space has further fueled investor optimism.
-Tata Steel and NTPC: Tata Steel benefited from rising steel prices globally, while NTPC’s gains were linked to its strategic investments in renewable energy, positioning it well for future growth in the green energy sector.
-State Bank of India and Kotak Mahindra Bank: Both banks saw strong buying interest due to improving loan growth and asset quality. The banking sector is expected to benefit from the economic recovery and lower credit costs, which have improved the outlook for earnings.
Challenges and Laggards
Despite the overall market rally, a few stocks faced selling pressure:
-ICICI Bank: The stock saw some profit-booking as investors took advantage of recent gains. However, the long-term outlook remains positive given the bank’s strong fundamentals.
-HCL Technologies: Tech stocks, including HCL Technologies, experienced mild pressure amid concerns over potential moderation in global tech spending. However, robust order books and expansion into new technology domains keep the long-term view intact.
Global Market Influence
The domestic rally was closely aligned with positive trends in global markets. While U.S. markets ended on a mixed note on Friday, the overall sentiment remained positive, aided by the Fed’s rate cut and encouraging economic data. Asian markets, particularly in China and South Korea, also showed strong performance, contributing to a favorable backdrop for Indian equities.
Commodities and Currency Market Impact
In the commodities market, Brent crude oil rose 0.75% to USD 75.05 per barrel, reflecting stability in energy markets. Rising oil prices, while generally a concern for India due to its import dependence, were seen as manageable given the broader economic strength and inflows of foreign capital. On the currency front, the Indian rupee traded in a narrow range against the U.S. dollar, supported by the strong inflow of foreign funds and stable global conditions.
Outlook and Investor Sentiment
Looking ahead, analysts remain cautiously optimistic about the continued rally in Indian equities. The market’s resilience in the face of global uncertainties, such as geopolitical tensions and fluctuating commodity prices, has impressed investors. However, market watchers advise caution, pointing out that valuations are becoming stretched, and any adverse global developments could trigger profit-booking.
VK Vijayakumar from Geojit Financial Services noted, “The market’s current momentum is driven by liquidity and optimism around economic recovery. However, investors should be mindful of potential risks, including inflationary pressures and any unexpected shifts in global central bank policies.”
The Indian equity markets’ ascent to new record highs is a testament to the resilience and attractiveness of India as an investment destination. While strong FII inflows, positive global cues, and supportive domestic fundamentals have driven this rally, investors should continue to monitor market dynamics closely. With key economic indicators pointing towards sustained recovery, the medium to long-term outlook for Indian equities remains positive, although near-term volatility cannot be ruled out. As always, a balanced investment approach, with a focus on quality stocks and sectors poised for growth, will be crucial in navigating the evolving market landscape.
