Nifty Scales A New Peak, But Street Watch­ful

Buy­ing by do­mes­tic funds off­sets FII sell­ing

The Economic Times - - Front Page - Our Bu­reau

Mum­bai: The Nifty hit a fresh all-time high on Fri­day as en­cour­ag­ing do­mes­tic eco­nomic read­ings and op­ti­mism in ma­jor global mar­kets lifted sen­ti­ment. The ru­pee rose for the fifth straight day against the dol­lar, but that did not stop for­eign in­vestors’ stock-sell­ing spree. Con­tin­ued in­flows from do­mes­tic in­sti­tu­tions helped ab­sorb the sell­ing by their over­seas coun­ter­parts.

Nifty ended up 71.05 points, or 0.7%, at 10167.45 — its high­est clos­ing — af­ter hit­ting an in­tra­day peak of 10191.90. The in­dex sur­passed its pre­vi­ous record close of 10153.10, on Septem­ber 10.

The Sen­sex ended 250.47 points, or 0.8%, higher at 32432.69. The BSE bench­mark is 0.8% away from its all-time high of 32686.48, hit on Au­gust 2.

Bharti Air­tel was the top in­dex gainer, surg­ing nearly 8% af­ter in­vestors cheered its pur­chase of Tata Group’s mo­bile arm.

The ru­pee rose 16 paise, or 0.24%, to close at 64.93, the cur­rency’s strong­est level in more than three weeks.

For­eign port­fo­lio in­vestors stepped up sell­ing, dump­ing shares worth Rs 1,698.5 crore on Fri­day. Do­mes­tic in­sti­tu­tions al­most matched their sales, buy­ing stocks amount­ing to Rs 1,590.1 crore. “Mar­ket is be­ing driven by liq­uid­ity to a large ex­tent. For mar­ket to sus­tain, earn­ings have to re­cover,” said Ma­hesh Patil, co-chief in­vest­ment of­fi­cer at Birla Sun Life Mu­tual Fund.

Other Asian mar­kets gained 0.1-1% fol­low­ing strong trade data from China.

At home, in­vestors cheered the in­crease in in­dus­trial pro­duc­tion to a nine-month high of 4.3% in Au­gust. Re­tail in­fla­tion in Septem­ber was steady at 3.28%. Econ­o­mists said the data boosted in­vestor sen­ti­ment, but this may not be enough for Re­serve Bank of In­dia to cut rates. “It has boosted prospects of a rate cut, but RBI would want to gather more ev­i­dence and see if this dis­in­fla­tion­ary trend con­tin­ues,” said Sachchi­danand Shukla, chief econ­o­mist, Mahin­dra & Mahin­dra Group. “They would also want to gauge how ag­gres­sive the Fed (US Fed­eral Re­serve) is, as the min­utes of the Fed’s meet­ing re­cently showed many mem­bers were for a rate hike.”

Notwith­stand­ing the record mar­ket clos­ing, the un­der­tone is cau­tious. The Volatil­ity In­dex rose nearly 2%, show­ing some traders are un­com­fort­able about near-term mar­ket prospects. Usu­ally, when the mar­ket is strong, VIX de­clines and vice-versa.

An­a­lysts said a sec­tion of the mar­ket is wor­ried that stocks might fall again like last month, when the in­dices hit record lev­els. The Nifty had fallen 4% in the sec­ond half of Septem­ber as a mix of geopo­lit­i­cal con­cerns, a de­cline in the ru­pee, for­eign fund sell­ing, wor­ries about the do­mes­tic econ­omy and cor­po­rate earn­ings dragged down the mar­ket.

Since Au­gust 1, for­eign in­sti­tu­tions have sold shares worth Rs 27,941.5 crore while do­mes­tic in­sti­tu­tions have been buy­ers to the tune of Rs 44,280.85 crore. For­eign­ers have sold Rs 4,550 crore of stocks since Oc­to­ber 1, while their do­mes­tic coun­ter­parts have bought shares amount­ing to Rs 7,050 crore.

Some an­a­lysts said the con­tin­ued strength in do­mes­tic in­flows could help sus­tain the mo­men­tum though earn­ings for the Septem­ber quar­ter over­all are likely to be muted. “The Septem­ber quar­ter earn­ings will be fairly okay, mainly due to ma­te­ri­als and oil & gas com­pa­nies. If these sec­tors are re­moved, earn­ings would be muted — in sin­gle dig­its. We ex­pect earn­ings to re­cover from De­cem­ber quar­ter on,” said Patil of Birla Sun Life Mu­tual Fund.

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