Markets sparkle ahead of Diwali

Sensex, Nifty gain 0.6% each to clock record highs

The Diwali week started on a positive note with the benchmark Sensex and Nifty indices ending at new record highs. Positive global markets and the ebbing of foreign investor selling saw the benchmark indices gain 0.6 per cent and the rupee appreciate 0.3 per cent against the dollar.

The Sensex rose 201 points, or 0.62 per cent, to close at an all-time high of 32,634, surpassing the previous high touched on August 1. Gaining for a third straight session, the Nifty50 Index added 63.4 points, or 0.62 per cent, to close at 10,231. The rupee closed at a three-week high against the greenback at 64.72, compared to the previous close of 64.92.

Foreign portfolio investors (FPIs) were marginal sellers to the tune of ~30 crore, while domestic institutions bought shares worth ~273 crore, provisional data from the stock exchanges showed. Supportive global markets and economic green shoots have contributed to the latest rebound in the market, say analysts. The Indian markets had come off four per cent in September, on worries surrounding the slowdown in the economy. The inflation and industrial output data, released last week, had surprised market players positively.

“There is a lot of optimism in the Indian markets currently. While there could be short-term volatility, the longterm picture looks solid. I don’t think the current concerns like that of economic slowdown are going to have any bearing on the market from a longterm perspective. Even the selling by foreign funds is not a serious issue, as FPIs and domestic institutions are known to be counter-buyers. So, as long we see net inflows into the market, it should be fine,” said Motilal Oswal, chairman and managing director (MD), Motilal Oswal Financial Services.

Market players say despite expensive valuations, the domestic market is showing resilience, thanks to robust buying by mutual funds (MFs). Since August, MFs have pumped in over ~50,000 crore into the domestic market even as overseas investor selling has exceeded ~20,000 crore. Monday’s rally was led by Bharti Airtel, which gained five per cent to close at an eight-year high.

Shares of the telecom giant have rallied more than 14 per cent in the last sessions on the hopes that the merger of Tata Communications with Airtel will help the company. Auto stocks also saw a positive momentum on hopes of robust festive season sales. Shares of Mahindra & Mahindra and Tata Motors gained 3.1 per cent and 2.8 per cent, respectively, on Monday.

Analysts say a lack of corporate earnings could be the single-biggest headwind for the Indian markets. They are expecting single-digit earnings growth for the September quarter due to the impact of the goods and services tax (GST). They, however, expect the earnings momentum to pick up from the next quarter onwards.

“The September quarter numbers will provide more clarity on the impact of the GST. A revival in earnings is a must if the markets have to sustain the current level of valuations. Sectors such as private banks, metals, and auto are expected to do well, while technology, pharma, and public-sector banking could be an overhang on the markets,” said G Chokkalingam, founder & MD, Equinomics Research & Advisory.

Most global markets, including the US, Japan, South Korea, and Brazil have seen sharp gains in recent weeks.

The market on Thursday will remain open only for an hour for the Muhurat trading sessions and will be shut on Friday for Diwali.