Nifty posts biggest gain in over 4 months
Supply of new paper could cap further gains; FIIs continue to sell equities
The benchmark Nifty index on Thursday posted its biggest single-day gain since May 25 to close above the 10,000 level. The gains were led by a near four per cent rally in index heavyweight Reliance Industries, which closed at a lifetime high of ~872.50. The 30-share Sensex gained 348 points, or 1.1 per cent, to close at 32,182, after climbing to 32,210 during the day. The Nifty closed at 10,096, less than 60 points, or 0.6 per cent, shy of a new record high.
The National Stock Exchange’s benchmark Nifty index on Thursday posted its biggest single-day gain since May 25 to close decisive ly above the psychologically important 10,000 level. The gains were led by a nearly four per cent rally in index heavyweight Reliance Industries, which closed at a new lifetime high of ~875.60.
The 30-share Sensex gained 348 points, or 1.1 per cent, to close at 32,182, after climbing to 32,210 during the day. The Nifty closed at 10,096, less than 60 points, or 0.6 per cent, shy of a new record high.
The gains were also supported by positive global cues, with US equities closing at a new record high and the Japanese market recording its highest level in two decades.
The Nifty had hit a lifetime high of 10,153 on September 18, following which the index had come off four per cent amid concern over slowing economic growth and global uncertainty due to the US Federal Reserve’s decision to shrink its balance sheet. The rebound in the market has been on the back of strong buying by domestic mutual funds (MFs), even as foreign investors have continued to take money off the table.
On Thursday, foreign institutional investors (FIIs) sold shares worth ~668 crore, while the domestic institutions bought equities worth ~872 crore, according to provisional data from the bourses.
Since August, FIIs have sold shares worth ~20,000 crore, while MFs have pumped in close to ~50,000 crore.
Going ahead, market performance could be muted due to huge line-up of new equity offerings and also uncertainty surrounding the September quarter earnings.
GIC Re’s ~11,400- crore IPO (initial public offering), the country’s third-largest, closes on Friday. The government has lined up two more ~10,000-crore-plus offerings, that of New India Assurance and Bharat-22 ETF, in the subsequent weeks. The big-ticket offerings come amid sell-off by foreign institutions.
“We are going to see an unprecedented supply of fresh paper hitting the market over the next few weeks. This could negatively impact the secondary market. There is a major riskoff among overseas investors. Domestic investors may redeem some of their investments to participate in the new offerings,” said an official with a foreign brokerage.
In a recent note, brokerage CLSA had said Indian markets would remain flat in the remaining part of the year due to weak FII flows and a big IPO line-up.
“We expect another $4 billion of supply over the next three months, and as such, higher foreign flows would be needed to support the market. Foreign flows are unlikely to improve in the near term, as earnings momentum in the rest of Asia is far better than that in India and valuations are cheaper,” said Mahesh Nandurkar, India strategist, CLSA.
Reliance Industries alone contributed to nearly a third of the gains in the benchmark indices on Thursday. Market players said the rally was on account of attractive new plans unveiled for its telecom subsidiary Jio.
Shares of technology major Tata Consultancy Services (TCS) gained two per cent ahead of the announcement of its results. Shares of Axis Bank, Adani Ports and Hindustan Unilever gained 1.7 per cent each. The ongoing earnings season is not expected to provide impetus to the markets, as analysts are expecting only single-digit growth numbers for the September quarter.
On the macroeconomic front, there are several headwinds. The GDP (gross domestic product) growth numbers have been less than expected, while small and medium enterprises (SMEs) are still reeling under the impact of the goods and services tax (GST).
“The small- and mid- cap companies will continue to feel the earnings pain for at least another two quarters. Data on the economic front is also not looking positive. Such situations are bound to have an impact on the stock movement. In this context, I think large- cap stocks would provide a safer bet to investors than the mid- and small-caps,” said G Chokkalingam, founder, Equinomics Research and Advisory.
Since August, foreign institutional investors have sold shares worth ~20,000 crore, while mutual funds have pumped in close to ~50,000 crore