Nifty posts big­gest gain in over 4 months

Sup­ply of new pa­per could cap fur­ther gains; FIIs con­tinue to sell eq­ui­ties

Business Standard - - FRONT PAGE - PA­VAN BURUGULA

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

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