Upbeat mood takes Sensex over 26,000 mark again

Tags: Mutual Funds
Stock rallied on Tuesday with the BSE benchmark Sensex closing above the 26,000 mark for the second time ever. Ease in geopolitical tension and upbeat sentiment in the domestic market on better-than-expected earnings by frontline companies fuelled the rally. With Tuesday’s gains, the 30-pack index has surged over 1,000 points, rising from 25,000 to 26,000 level, in just six trading sessions.

“Supportive global markets, slight easing of geo-political tensions and continued optimism on long-term growth prospects of the economy helped sentiments. Monsoon has been progressing across India over the past few days, easing worries over inflation. Quarterly results, especially from IT majors, have been above estimates,” said Dipen Shah, head of research at Kotak Securities.

The Sensex traded firm throughout the trading session to eventually settle 310.63 points, or 1.21 per cent, higher at 26,025.80. The Nifty added 83.65 points, or 1.09 per cent, to close at 7,767.85.

Nonetheless, the rally was concentrated to large cap stocks, with 8 out of 10 Sensex scrips ending higher, but one out of every two midcap and smallcap stocks ending lower.

Bharti Airtel climbed 4.81 per cent to Rs 353.25 after the Trai recommended sharing of spectrum within the same band.

“We believe this is incrementally positive for telecom firms, and should allow for more efficient use of spectrum on data, where capacity is more critical and monetisation has been a challenge,” said Sachin Gupta, research analyst at Nomura India.

Reliance Industries rose 4.81 per cent to Rs 1,030.80, riding on recent positive numbers.

HDFC, TCS, Hindalco and Wipro added 2.93 per cent, 2.71 per cent, 2.62 per cent and 2.53 per cent, respectively.

On the downside, Maruti Suzuki, Larsen & Toubro, Mahindra and Mahindra and BHEL declined 1 per cent, 0.92 per cent, 0.51 per cent and 0.32 per cent, respectively.

The valuation premium of domestic equities over other emerging economies has touched a five-year high.

Meanwhile, markets across Asia were positive even as Japan lowered its GDP growth target to 1.2 per cent for financial year 2014-15 from 1.4 per cent anticipated in January. Hang Seng gained 1.69 per cent; Shanghai Composite rose 1 per cent, Nekkei was up 0.84 per cent. European bourses too rose upto 2 per cent.

The valuation premium of domestic equities over other emerging economies has touched a five-year high. The Sensex has risen 23 per cent year-to-date, in comparison with 6 per cent fall in mainland Chinese benchmark Shan­ghai Composite index. Taiwanese TWSE index and Korea’s Kospi index have risen 1 per cent and 10 per cent, respectively, during the same period.

Indian equities have seen $11.85 billion worth of foreign inflows year-to-date. Only Taiwan has seen similar flows.

Brokerage Credit Suisse believes Indian market has been driven by improving risk appetite globally and bottoming out of growth. In a note it said even if the pace of change driven by the government disappoints consensus, domestic equities may perform well.

Bank of America ML, which met 60 foreign investors over the last two weeks, said while most foreign investors see a slight pullback on global concerns and a possible monsoon failure, they wished to buy on the dips. The brokerage believes the earnings have bottomed out and has maintained its year-end target of 27,000.

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