Sensex rallies over 52k mark for 1st time

The benchmark Sensex rallied over the 52,000

mark for the first time ever on Monday propelled by gains in the broader market. In yet another milestone, the 30-share BSE index jumped to its lifetime high of 52,235.97, rallying 691.67 points during the trade on Monday. It later closed with a gain of 609.83 points or 1.18% at 52,154.13, its new closing high. Banks and financial counters were the leading gainers in the market on Monday, with Axis Bank rising the most by 5.88%, followed by ICICI Bank,

Bajaj Finance, SBI, Indusind Bank, Bajaj Finserv, HDFC and HDFC Bank. “Optimistic global sentiment and improving corporate earnings are leading an uptrend in the market dictated by banking and realty stocks,” Vinod Nair, Head of Research at Geojit Financial Services. The benchmark index had closed above the 50,000 mark for the first time ever on February 3 this year, mainly driven by the Union Budget.

Strong earnings growth pushed stock indices to fresh records on Monday as investors piled on to banking stocks on hopes of a faster economic recovery.

The BSE Sensex rose 609.83 points, or 1.18%, to 52,154.13. The 50-share Nifty also gained 1% to end at 15,314.70.

The rebound in corporate earnings has sparked hopes of a faster-than-expected economic recovery in India, lifting stocks in economically sensitive sectors such as banking. “Strong corporate earnings have ignited hopes of faster economic recovery while buoyant global markets also aided risk sentiment. Moreover, a better-than-expected December industrial output number and January retail inflation, which fell to a 16-month low, boosted market sentiments,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

Retail inflation, as measured by the Consumer Price Index (CPI), slowed to 4.1% in January from 4.6% in December as prices of food items cooled. Headline inflation is now close to the Reserve Bank of India’s medium-term target of 4%. Economists are expecting the central bank to focus on funding the high fiscal deficit at reasonable yields to nurse the recovery.

“The comfort on headline inflation should allow RBI to maintain status quo on rates, stance and liquidity. However, as growth normalizes, so should policy. We expect the process of liquidity normalization to begin in mid-2021,” said Sonal Varma and Aurodeep Nandi, economists at Nomura.

Later in the week, investors will look out for the minutes from the US Federal Reserve’s January meeting, where policymakers left rates unchanged, for hints to the likely direction of monetary policy.

Indian markets have jumped more than 10% after the Union budget was presented in Parliament on 1 February. However, rising crude prices is a threat to the overall recovery and may take the shine off markets rally as oil prices are headed towards $65 per barrel. “The growth recovery is gaining momentum. If this trend is sustained, corporate profits will surprise on the upside in FY22, bringing stock valuations down. Rising crude price is a concern,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services. Corporate earnings were robust in the December quarter, a bright spot for the economy that is seeking to exit the brutal effects of the pandemic. Out-of-home consumption, festive demand and improved consumer sentiment, besides benefits of tight cost control, led to better-than-expected earnings growth in the quarter.

Analysts say some cost rationalization measures by firms taken in previous quarters may reverse as the economy opens up. Rise in prices of major commodities is feared to hit gross margins but analysts expect firms to offset the impact through product price increases.

With China and Hong Kong markets closed for the Lunar New Year holiday, Japan’s Nikkei led the way, climbing 1.9% to reclaim the 30,000-point level for the first time in more than three decades. Global shares rose for the 11th day in a row to reach a fresh peak on the optimism about the rollout of Covid-19 vaccines and new fiscal aid from the US, while tensions in West Asia drove oil to a 13-month high.

Reuters