Sensex, Nifty record new highs on strong inflows
INVESTOR OPTIMISM Steady flow of funds has helped propel markets to new records as domestic and foreign investors bet on India’s structural reforms story
Benchmark equity index Sensex crosses the psychologically important 31,000-mark for the first time ever on Friday, while Nifty also recorded a new high, backed by optimism over reforms progress and continued strong inflows.
BSE’s 30-share Sensex closed 0.90% or 278.19 points higher at a record close of 31,028.21 points, while National Stock Exchange’s 50-share Nifty climbed 0.90% or 85.35 points to a record close of 9,595.10 points.
Earlier in the day, Sensex climbed as much as 1.05% or 324.04 points to an all-time high of 31,074.07, while Nifty rose as much as 1% or 95.15 points to a record high of 9,604.90 points.
A continuous inflow of funds from domestic and foreign investors have helped propel the Indian markets to new highs, as they place their bets on the country’s structural reforms story, and subsequent likely recovery in economic and corporate earnings growth.
While foreign institutional investors or FIIs invested a net of $7.81 billion in Indian shares so far in 2017, domestic institutional investors or DIIs have parked a net of ₹12,587.18 crore in the asset class in the same period.
“The steady domestic flows along with FII inflows are driving the market. The corporate earnings numbers are broadly in line, are supporting the sentiment,” said Rikesh Parikh, vicepresident of equities at Motilal Oswal Financial Services Ltd.
“There could be minor cut in earnings estimates, but any major downward revision is ruled out,” added Parikh.
Foreign investors also see this rally continuing in days to come.
“I would expect Indian equities to perform rather well in the coming quarters,”said MaartenJan Bakkum, the Hague, Netherlands-based senior emerging markets strategist at NN Investment Partners.
Bakkum pointed that the prospects for domestic demand growth remain good, which is increasingly important given the expected slowdown of Chinese growth and India’s limited sensitivity to that.
Investors have applauded reforms such as demonetization and The goods and services tax (GST) and hoped that the Bharatiya Janata Party’s win in Uttar Pradesh earlier this year, could set the stage for continued political stability at the centre.
Apart from India, Bakkum’s other favourites in emerging market equities space were Indonesia, Chile, Vietnam, Argentina and Egypt.
“Also, with Indian inflation and interest rates coming down, domestic investment flows into equities should remain strong,” added Bakkum
For the year to date, Indian equity market is also the secondbest performing in key emerging market and Asia ex-Japan space, after Korea Composite Stock Price Index (Kospi).
So far in 2017, while Kospi has returned 18.66% in local currency terms respectively, Nifty has logged comparable gains of 17.22% respectively.
“I am bullish on Indian markets, in fact it is the best bet in the emerging markets equities, particularly the small cap space. After India, I like commodities and commodities-backed markets such as Russia and Brazil,” said Shankar Sharma, vicechairman and joint managing director of First Global Securities Pvt. Ltd.