Early Diwali on D-Street
Oct 31 2013 , New Delhi
Sensex surges to all-time high at 21,034, as FIIs pump in more cash on growing optimism; midcap & smallcap stocks miss rally
On November 5, 2010 Sensex had closed at 21,004.96, the highest the index had reached till that time. On Wednesday, this was topped with the 30-stock benchmark going to a new high of 21,033.97.
“Present valuations lo-ok cheap compared with the historical highs,” said Tirthankar Patnaik, director of institutional research at Religare Capital Markets. But he doubted the trend would sustain. “Gains may be shortlived, unless the macro-economic environment improves,” he added.
The surge in foreign inflows in the past two months after the US Fed delayed the tapering of the bond-buying programme has primarily fuelled Sensex’s journey from 17,900 to 21,000-plus.
Nifty’s level has also risen to 6,250 from 5,300 in these two months, but this index needs to gain another 61 points to cross its all-time high of 6,312.45 reached around the same time as Sensex peaked in 2010. FIIs have invested Rs 14,678 crore ($2.38 billion) in Indian stocks so far in October, raising the total for the calendar to Rs 87905.80 crore ($16 billion). In addition, provisional data from stock exchanges showed that foreign investors were net buyers of stocks worth Rs 1,016.77 crore on Wednesday.
“The surge in Sensex was triggered by optimism on the back of good results, higher liquidity provision for the banking system by RBI in its credit policy and a possible delay in the tapering of quantitative easing in the US,” said Ravi Shenoy of Motilal Oswal Services.
Foreign institutional investors (FIIs) have been net buyers of stocks to the tune of Rs 13,466.70 crore so far this month. In September, they were net buyers of Rs 13,057.80 crore worth of stocks.
On the day, Asian markets from Tokyo to Hong Kong to Jakarta were all up by between 0.30 and 2 per cent, bolstered by the overnight rally in the US market, which had closed at a record high.
However, markets in the Euro zone and the US turned weak later on Wednesday just ahead of the Fed money policy review. The Sensex opened the day positive and took no time to breach 21,000. It traded range-bound for a while before buying intensified and the index hit an intra-day high of 21,086.59.
FIIs have been big buyers in most markets, including India, after US president Barack Obama nominated Janet Yellen to succeed Ben Bernanke as the next Federal Reserve chairman earlier this month. Yellen is considered more dovish than the outgoing Bernanke, signalling no early slowdown in the quantitative easing programme.
The BSE benchmark eventually ended the day 104.96 points, or 0.50 per cent, higher at 21,033.77, a new closing high. BSE’s market capitalisation swelled by Rs 29,764 crore to Rs 67,80,650 crore, but its was lower than the Rs 77,23,100 crore peak hit in November 2010. Midcaps and smallcaps did not participate much in the rally. Nifty rose by 30.80 points, or 0.50 per cent, to close at 6,251.70.
Bharti Airtel gained 5.23 per cent to Rs 359.05 after the company reported a 29 per cent year-on-year drop in net profit for the September quarter at Rs 512 crore. The market had expected far worse.
Dr Reddy’s, Hindalco, ICICI Bank and BHEL gained 3.87 per cent, 2.77 per cent, 2.23 per cent and 2.09 per cent, respectively. Bajaj Auto, Hindustan Unilever, HDFC and TCS rose by 1.92 per cent, 1.41 per cent and 1 per cent and 0.96 per cent, respectively. ITC gained 1.57 per cent to Rs 333.05 and Dr Reddy’s 3.87 per cent to Rs 2,552.65.
Seven stocks in the BSE midcap index gained between 5 and 11 per cent. Financial Tech (10.60 per cent), Tata Communications (10.26 per cent), HMT (7.89 per cent), Torrent Power (7.74 per cent) and Havells India (7.14 per cent) were among them.
A total of 28 smallcap index constituents rose by between 5 and 20 per cent. In all, 1,270 of the 1,161 stocks trading on the Bombay Stock Exchange ended higher.
“Broadly, the market seems to have over-retraced rather than overbought and the chances of hitting still higher levels of 21,210 and more in the near future are bright,” said Shrikant Chouhan of Kotak Securities.