Nifty Scales A New Peak, But Street Watchful
Buying by domestic funds offsets FII selling
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.