Q1 GDP data pushes Nifty above 8,000
Sep 01 2014 , Mumbai
Data released on Friday signaled the economy is on the recovery path as GDP is growing at 5.7 per cent, the fastest in 10 quarters, mainly driven by a strong industrial sector. This boosted market sentiment.
Most brokerage houses predict that the Indian economy is turning around and growth momentum will pick up as the government takes more measures to stimulate the economy.
Both the Sensex and NSE Nifty ended the day at record highs.
After remaining firm during the entire trading session, Nifty rose as much as 1.01 per cent to a record high of 8,035, surpassing its August 25 all-time high.
It ended at 8,027.70, up 0.92 per cent. Even the BSE Sensex rose close to 1 per cent to a record high of 26,900 and finally ended the day at 26,867, up 229 points.
Indian equities have been on the rise since May this year on expectations major reforms by the new government. Year-to-date, Sensex is the best performing market among major global markets.
According to Ambit Investment Advisors CEO Andrew Holland, “It is a continuation of the global market trends. It is global liquidity that is triggering this rally and also good GDP numbers have improved sentiment in the domestic market. India is not the only market that is moving up and as long as this money flow continues, the momentum will remain.”
Strong buying in capital goods, power, auto and metal stocks helped both the indices surge higher.
The Indian market has gained close to 30 per cent year-to-date on the back of strong buying by foreign institutional investors, who had pumped in close to $13 billion so far this year.
ICICI Securities CIO Piyush Garg said, “Of course 8,000 is a good psychological level. If the market sustains above this level for the next couple of days, more buying could be expected. But you cannot rule out a 200-400 point correction in the short run and this could be triggered by global factors.”
Blue chip stocks led the gainers, with ICICI Bank up 2.7 per cent, while Larsen & Toubro rose 3.3 per cent.
Reliance Industries rose 1.5 per cent on reports that the company plans to invest about $13 billion in energy projects, including a 400,000 barrel per day (bpd) crude refinery at its Jamnagar complex.
Auto stocks also ended higher, with Maruti gaining 4.6 per cent and Hero Honda up 5.79 per cent as August sales numbers beat expectations.
Metal stocks like Hindalco, Jindal Steel and Power rose on hopes that the Supreme Court would not cancel their coal block allocations.
Shrikant Chouhan, head of technical research at Kotak Securities said: “Technically, Nifty closed above an important psychological resistance level of 8,000, which is something really extraordinary for the Indian markets. Since the results of exit polls of the election, Nifty has risen by 1,000 points. Technically, the Nifty will encounter the next major hurdle between 8,050 and 8,060. Any strong reversal from these will be negative for Nifty in the short term, as in that case it may even fall to 7,970 again. However, sustenance above 8,060 should lift indices beyond 8,100 levels.”
However, some experts caution that there could be correction in the short term.
Bank of America Merill Lynch (BoAML), which remains bullish on Indian equities on the long term, warns of a near-term correction.
“Post its strong performance, we think the market would be range-bound near term and may correct around 5 per cent over the next two months, giving up half of its post-election result gains, as the pace of reforms is slower than the market initially built in," its report says.
It recommends buying at every dip and is of the view that corporate earnings have turned the corner and are likely to double over the next four years. Market returns could mirror earnings growth.
“The market is trading at its fair value with 18 times the FY15 earnings. From here on, returns will be in sync with earnings growth for the next four to five quarters. So we can expect the market to give a return of 20 per cent in one year,” Garg said.