In a first, Nifty closes above 9,300; valuations rich
STREET SIGNS Global cues, earnings boost from domestic companies drive rally
Rich valuations for Indian stocks are not deterring investors as the benchmark Nifty index scaled a new record on Tuesday while the Sensex closed just 67 points shy of the psychologically important mark of 30,000. Better-than-expected earnings from the first lot of firms declaring March quarter results and a normal monsoon forecast buoyed investor hopes as the Indian stocks rode the tail of a worldwide rally after a centrist victory in the first round of the French presidential election.
The National Stock Exchange’s 50-share Nifty closed 0.96% or 88.65 points higher at 9,306.60 points on Tuesday. The 30-share Sensex closed 0.97% higher at 29,943.24 points.
“Overall sentiment is very supportive for emerging markets,” said Hertta Alava, the Helsinki, Finland-based director of emerging market funds at FIM Asset Management Ltd, in an emailed response.
“In France, Mr Macron will most likely become the next president, which is supporting euro and dollar has started to weaken. Dollar weakness is usually positive for EM. Inflows to emerging market funds will probably continue and India will get its share,” he added.
The Sensex has gained 12.46% so far this year, logging the highest gains among Asian equity indices , and is also the top gainers among peers in the so-called BRIC grouping (Brazil Russia, India and China).
Foreign institutional investors or FIIs have pumped in nearly $6 billion in Indian shares since the start of the year until Friday, but have sold a net of $173.29 million of shares in the first 13 sessions of April.
The record rally has pushed up valuations for stocks. The Nift’s one-year forward earnings is currently trading higher than the five-year average.
This has made investors such as Gautam Duggad, head of research at Motilal Oswal Financial Services Ltd cautious.
Going forward, sustenance of positive results momentum and more importantly management commentary about FY18 earnings recovery prospects will be a key thing to monitor as valuations do not offer much comfort from hereon,” cautioned Duggad.
Yet for others, valuations are not a big concern, and they believed Indian market could head north in days to come.
“The Indian equity market can continue to rise, driven by global risk appetite towards emerging market assets in general with the improving India growth picture and the favorable domestic fund flow dynamics,” said MaartenJan Bakkum, The Hague, Netherlands-based senior emerging markets strategist at NN Investment Partners (NNIP), who manages 8 billion euros assets.
“Valuations are rich, but they can become richer,”said Bakkum.
Tuesday’s rally was market wide with Bank Nifty and Nifty Midcap also recording a new high, while BSE500, BSE midcap, BSE smallcap, BSE basic materials, BSE consumer discretionary goods & services, BSE consumer durables, BSE finance, BSE industrials, and BSE utilities, also logged record highs in intraday trade.
Reliance Industries Ltd rose as much as 3.43% to ₹1,465 ,its highest level since 18 January, 2008 after the company reported better-than-expected 12.3% increase in its consolidated March quarter profit, boosted by higher refining margins and better earnings from its petrochemical unit.
It pared some gains and closed 1.14% higher at ₹1432.50.