Sensex@40k: June and now...

Reforms buzz keeps mood buoyant; index rises as much as 340 pts only to give up most gains

The benchmark Sensex on Thursday surpassed its previous intra-day record

high of 40,312 made on June 4. It touched an all-time intra-day high of 40,392 before paring the bulk of the gains and closing at 40,129. However, many of its components have seen dramatic changes in fortunes. Among the best-performing stocks in the past 100 days are Asian Paints (up 30 per cent), Hindustan Unilever (23 per cent) and Bajaj Finance (up 16 per cent). On the other hand, YES Bank (-52 per cent), Tata

Steel (-20 per cent) and Indusind Bank (-18 per cent) have been the biggest losers. In terms of index points, RIL (426-point contribution to Sensex gains) and ICICI Bank (289 points) have made the biggest contribution, while ITC (-178 points) and State Bank of India (SBI) have caused the biggest deficit. Since June 4, 18 stocks have given positive returns, while returns for only 6 have been in double digits. Of the 14 stocks to have given negative returns, half a dozen have dropped over 10 per cent.

“Leading up to the Budget, I expect the markets to be buoyant because there is a hope in markets that the government is understanding of its problems and will do the needful to address the concerns” RAMESH DAMANI Member, BSE

The benchmark Sensex on Thursday touched a new alltime high during intra-day trade, as tax cut hopes kept sentiment buoyant. However, the index gave up most of the gains as some investors turned sceptical on whether the Centre would be able to push ahead with another round of tax cuts, given the fiscal constraints. Volatility in global indices, after the US Federal Reserve lowered rates but signalled a pause, added to selling pressure amid expiry of derivative contracts.

The index gained as much as 340 points in intra-day trade to touch a new all-time high of 40,392. The previous all-time high was scaled on June 4, when it had risen to 40,312.

However, it failed to close above the all-time closing high touched in June. The Sensex ended the session at 40,129, up 77 points, or 0.19 per cent — 140 points below its previous high. The Nifty ended with a gain of 37 points, or 0.31 per cent, to close at 11,881.

The indices have been on an upmove since the past five sessions, on reports that the government might abolish the dividend distribution tax (DDT) and rationalise the equity tax structure.

Further, better-than-expected earnings announcement and steady global indices had further bolstered certain stocks.

“The rate cut by the US Federal Reserve should promote the inflow of foreign funds. Although the Sensex is close to a record high, there are many stocks available at good valuations in the broader market,” said G Chokkalingam, founder, Equinomics Research & Advisory.

Foreign portfolio investors (FPIS) have stepped up buying amid cooling off of bond yields in the developed markets. On Thursday, FPIS bought shares worth ~1,870 crore, adding to their record purchase of ~7,200 crore a day earlier.

Market players said that while sustained buying by FPIS was helping sentiment, investors need to exercise caution given the economic headwinds.

“The current rally may not extend beyond another 3-4 per cent. Despite well-intended measures, there are no signs of a meaningful demand recovery or new investments. Earnings growth has not thrown any significant positive surprises, and the much anticipated personal tax cut seems to be on the anvil. Globally, the Fed has announced a cut but also signaled a pause in their guidance, and the Us-china trade talks remain just work-in-progress,” said U R Bhat, director, Dalton Capital India.

“Globally, risky assets have been doing well amid progress in the Us-china trade talks, Brexit and expectations of more rate cuts by Fed. The conditions for global risk-on trade have turned favourable” ANDREW HOLLAND CEO, Avendus Capital Alternate Strategies

Barring three, all the 19 sector subindices compiled by the BSE gained, led by a gauge of telecom companies.

Eighteen companies in the Sensex pack rose. YES Bank rallied the most at 24 per cent, after the lender informed stock exchanges that it had received a binding offer from a global investor for an investment of $1.2 billion in the bank through fresh issuance of equity shares.

State Bank of India rose 7.7 per cent, Infosys and Tata Motors rose more than 3 per cent.