On Thursday, the Nifty and Sensex, key stock market indices in India, ended the day at a lifetime high, led by gains in index heavyweights. Banks were the best sectoral performers in today’s trade.
The S&P BSE Sensex touched a lifetime high of 75,460 intraday, before closing at 75,418, higher by 1,197 points or 1.61 per cent. The Nifty50, on the other hand, came within striking distance of 23,000 as it hit a record peak of 22,989. It ended at 22,968, up 370 points or 1.64 per cent.
The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued largecaps., said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services in a note.
When the stock market opened for trading today, investors had cues from two central bankers to choose from – world’s most powerful Jerome Powell, who runs the US Federal Reserve, and RBI Governor Shaktikanta Das. Ignoring Fed officials’ concerns over lack of progress on inflation as revealed in Fed minutes, the bulls chose to focus on the bumper dividend of Rs 2.1 lakh crore announced by the India’s central bank for the government.
“The higher-than-budgeted RBI surplus transfer would help to boost the government of India’s resource envelope in FY2025, allowing for enhanced expenditures or a sharper fiscal consolidation than what was pencilled into the Interim Budget for FY2025. Increasing the funds available for capex would certainly boost the quality of the fiscal deficit,” ICRA’s chief economist Aditi Nayar said.
The windfall revenue bonanza, which is equivalent to about 0.4% of GDP, is being seen as a significant macroeconomic positive for the market, with direct implications for fiscal deficit and bond yields.
“The infusion of funds is akin to an indirect rate cut for the economy, as it is expected to lead to a reduction in bond yields. Since many investment instruments are linked to government bond yields, this reduction will likely have a broad positive impact across the financial markets. The improved fiscal position could also prompt upgrades in India’s economic outlook,” said Santosh Meena, Head of Research at Swastika Investmart.
PSB stocks lead post-RBI’s bumper dividend
Shares of public sector banks (PSBs), in particular, were in focus, rallying up to 3 per cent a day after the Reserve Bank of India (RBI) announced dividend payment of Rs 2.1 trillion crore for FY25.
Nifty to top 23,000 soon?
Analysts at foreign brokerage Bernstein, see a higher probability of the BJP government winning around 330-350 seats, thus driving some rally in the markets post-election results. They expect the Nifty 50 index to scale past the 23,000 mark.
FIIs
Despite continuous selling by FIIs in the cash market, analysts expect that foreigners may shift to buying, which would provide additional support to the market.
Over the last few trading days, barring May 21, selling by foreign institutional investors has slowed down. The FIIs have net sold stocks to the tune of Rs 1,813 crore in the last five trading days as against net sales of Rs 38,186 crore so far in May.
The US-10 year yield has eased to 4.43 per cent from a high of 4.73 per cent a month ago. Traders are expecting at least two rate cuts in the calendar year 2024.
Meanwhile, the 10-year bond yield in India was seen quoting around 7 per cent as against the 52-week high of 7.395 per cent.
Technical outlook
Looking ahead, the Nifty index may witness further expansion. An immediate target of 23,000 is in sight, with the possibility of reaching 24,000 as the election outcome approaches. However, while large-cap stocks are expected to perform well, mid-cap and small-cap stocks may underperform from this point forward, Santosh Meena said.
The S&P BSE Sensex is seen quoting near its all-time high. Fibonacci charts suggest the presence of some resistance in the 75,200 – 75,600 range. Breakout and sustained trade above the same can trigger a swift rally for the BSE Sensex up to 78,100 levels.
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