Surge in rupee, better CAD number lift mood
BSE benchmark Sensex touched a life-time high on Thursday, as investors lapped up shares across sectors after opinion polls projected that the April-May elections would likely throw up a stable government at the centre. A sudden drop in the December quarter current account deficit (CAD), which hit the lowest level in four years, also lifted the mood in the money market.
High-beta stocks gained sharply on Thursday after months of underperforma*n*ce. There have been occasions when select high-beta stocks rose, but on Thursday the trading screen reminded traders of the good old days of 2007 when the broader market breadth wo*uld be extremely positive.
Some traders called it the second phase of ‘hope trade’, an euphemism used to indicate expectation levels among investors for a change of government in the forthcoming general election. The first phase of the so-called ‘hope trade’ was seen in October 2013 following the state election results.
The S&P BSE Sensex rallied 237.01 points to close at 21,513.87, breaching the previous high of 21,483.74 hit on December 9, 2013. According to market data provider Capitaline, the 30-stock benchmark rose 4,065.16 points, or 23.29 per cent, in just over six months from its 52-week low of 17,448.71 hit on August 28, 2013.
NSE’s Nifty index closed at 6,401.15 with a gain of 72.50 points, but failed to breach its all-time high of 6,415.25 hit on December 9, 2013.
The rupee strengthened to a three-month high on Thursday. This and continued buying by foreign institutional investors amid positive cues from Asian and European markets helped Sensex touch an intra-day high of 21,525.14. Nifty’s intra-day high was 6,406.60.
Other Asian markets had a good show too; Japan’s Nikkei rose 1.59 per cent, Hong Kong’s Hang Seng 0.55 per cent and China’s Shanghai 0.32 per cent.
European markets were in the green when the Indian market closed for the day. Germany’s Dax moved up 0.25 per cent in the first few hours, France’s CAC 0.63 per cent and the UK’s FTSE 0.14 per cent. European Union leaders gathered in Brussels for an emergency summit on Thursday to seek ways to pressure Russia to back down and accept mediation in the showdown over Ukraine after Crimea’s parliament voted to join Russia. That didn’t deter Asian investors.
The Indian market has been charting its own course over the past six weeks, mostly outperforming its Asian peers. Even at the height of the Ukraine crisis, the Indian market slipped on just one day and was able to recover the losses the very next day.
Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, said, “The market has hit a new high on strong inflows from foreign portfolio investors as well as increasing retail participation. Normally, there is always a pre-election rally and this is getting reflected at this point. We feel a strong political mandate will increase optimism and lead the market to even higher levels.”
Provisional data from the bourses showed FIIs on Thursday made the biggest single-day equity purchase this year of Rs 1,272.93 crore following a Rs 747.90 crore worth of buys the previous day. Domestic institutional investors were net sellers of shares worth Rs 567.10 crore.
FII investment in equities has been largely subdued in the first two months of this calendar, but the pace of inflows rose this week. These portfolio investors have injected Rs 3,893 crore in domestic equities till March 5, but put in almost ten times that amount — Rs 30,200 crore — in the debt segment. The rupee’s rise to its highest close against the dollar since December 10, 2013 also cheered market participants. The rupee closed at 61.11 from the previous close of 61.75.
Some analysts said the stocks rally started way back in August-September and has sustained this far. Atul Bhole, a fund manager with Tata Asset Management Company, said, “Supportive valuations and ‘bottoming out of earnings’ kickstarted the upward trend in the market in September 2013 itself. Relatively better results compared with expectations in the second and third quarters, barring a few sectors, helped sustain this trend.”
Midcap stocks will likely continue their outperformance from here on, while some of the largecap stocks may see a cooling-off as some analysts find their valuations stretched after sustained rise since 2010. Money may now start flowing into the cyclicals — stocks that rise or fall with an economic cycle — as their risk-reward ratios have improved due to extremely low valuations, the analysts said.
They argue that any further rise in the broader market benchmarks will depend on the behaviour of the banking stocks, especially PSU banks, as they have significant weightage in both Sensex and Nifty. “The rally will gather momentum if the banking stocks continue to move up the way they did on Thursday, but will fizzle out in a broader market consolidation if banks falter,” they argued.
Tata AMC’s Bhole credited a substantial improvement in the domestic macro-economic parameters, a significant decrease in fears over Fed taper and expectations of an execution-focused government at the centre for the euphoria in the market
Stocks from the capital goods, power, realty, bank and oil & gas sectors witnessed huge investor interest on Thursday. Some of the big gainers included Reliance Infrastructure (10.07 per cent), Jaiprakash Associates (8.49 per cent), DLF (5.08 per cent), BPCL (4.27 per cent), ONGC (2.86 per cent) and NTPC (2.59 per cent).
Top Sensex gainers included miner Hindalco (4.33 per cent), capital goods stock BHEL (3.78 per cent), private bank ICICI Bank (3.33 per cent), PSU energy explorer ONGC (2.91 per cent) and steel major Tata Steel (2.38 per cent).
BSE benchmark Sensex touched a life-time high on Thursday, as investors lapped up shares across sectors after opinion polls projected that the April-May elections would likely throw up a stable government at the centre. A sudden drop in the December quarter current account deficit (CAD), which hit the lowest level in four years, also lifted the mood in the money market.
High-beta stocks gained sharply on Thursday after months of underperforma*n*ce. There have been occasions when select high-beta stocks rose, but on Thursday the trading screen reminded traders of the good old days of 2007 when the broader market breadth wo*uld be extremely positive.
Some traders called it the second phase of ‘hope trade’, an euphemism used to indicate expectation levels among investors for a change of government in the forthcoming general election. The first phase of the so-called ‘hope trade’ was seen in October 2013 following the state election results.
The S&P BSE Sensex rallied 237.01 points to close at 21,513.87, breaching the previous high of 21,483.74 hit on December 9, 2013. According to market data provider Capitaline, the 30-stock benchmark rose 4,065.16 points, or 23.29 per cent, in just over six months from its 52-week low of 17,448.71 hit on August 28, 2013.
NSE’s Nifty index closed at 6,401.15 with a gain of 72.50 points, but failed to breach its all-time high of 6,415.25 hit on December 9, 2013.
The rupee strengthened to a three-month high on Thursday. This and continued buying by foreign institutional investors amid positive cues from Asian and European markets helped Sensex touch an intra-day high of 21,525.14. Nifty’s intra-day high was 6,406.60.
Other Asian markets had a good show too; Japan’s Nikkei rose 1.59 per cent, Hong Kong’s Hang Seng 0.55 per cent and China’s Shanghai 0.32 per cent.
European markets were in the green when the Indian market closed for the day. Germany’s Dax moved up 0.25 per cent in the first few hours, France’s CAC 0.63 per cent and the UK’s FTSE 0.14 per cent. European Union leaders gathered in Brussels for an emergency summit on Thursday to seek ways to pressure Russia to back down and accept mediation in the showdown over Ukraine after Crimea’s parliament voted to join Russia. That didn’t deter Asian investors.
The Indian market has been charting its own course over the past six weeks, mostly outperforming its Asian peers. Even at the height of the Ukraine crisis, the Indian market slipped on just one day and was able to recover the losses the very next day.
Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, said, “The market has hit a new high on strong inflows from foreign portfolio investors as well as increasing retail participation. Normally, there is always a pre-election rally and this is getting reflected at this point. We feel a strong political mandate will increase optimism and lead the market to even higher levels.”
Provisional data from the bourses showed FIIs on Thursday made the biggest single-day equity purchase this year of Rs 1,272.93 crore following a Rs 747.90 crore worth of buys the previous day. Domestic institutional investors were net sellers of shares worth Rs 567.10 crore.
FII investment in equities has been largely subdued in the first two months of this calendar, but the pace of inflows rose this week. These portfolio investors have injected Rs 3,893 crore in domestic equities till March 5, but put in almost ten times that amount — Rs 30,200 crore — in the debt segment. The rupee’s rise to its highest close against the dollar since December 10, 2013 also cheered market participants. The rupee closed at 61.11 from the previous close of 61.75.
Some analysts said the stocks rally started way back in August-September and has sustained this far. Atul Bhole, a fund manager with Tata Asset Management Company, said, “Supportive valuations and ‘bottoming out of earnings’ kickstarted the upward trend in the market in September 2013 itself. Relatively better results compared with expectations in the second and third quarters, barring a few sectors, helped sustain this trend.”
Midcap stocks will likely continue their outperformance from here on, while some of the largecap stocks may see a cooling-off as some analysts find their valuations stretched after sustained rise since 2010. Money may now start flowing into the cyclicals — stocks that rise or fall with an economic cycle — as their risk-reward ratios have improved due to extremely low valuations, the analysts said.
They argue that any further rise in the broader market benchmarks will depend on the behaviour of the banking stocks, especially PSU banks, as they have significant weightage in both Sensex and Nifty. “The rally will gather momentum if the banking stocks continue to move up the way they did on Thursday, but will fizzle out in a broader market consolidation if banks falter,” they argued.
Tata AMC’s Bhole credited a substantial improvement in the domestic macro-economic parameters, a significant decrease in fears over Fed taper and expectations of an execution-focused government at the centre for the euphoria in the market
Stocks from the capital goods, power, realty, bank and oil & gas sectors witnessed huge investor interest on Thursday. Some of the big gainers included Reliance Infrastructure (10.07 per cent), Jaiprakash Associates (8.49 per cent), DLF (5.08 per cent), BPCL (4.27 per cent), ONGC (2.86 per cent) and NTPC (2.59 per cent).
Top Sensex gainers included miner Hindalco (4.33 per cent), capital goods stock BHEL (3.78 per cent), private bank ICICI Bank (3.33 per cent), PSU energy explorer ONGC (2.91 per cent) and steel major Tata Steel (2.38 per cent).