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Wednesday, November 25, 2020

Sensex crosses 44K-mark; FPI inflows fuel 11% Nov rally

The benchmark Sensex rose 224 points to 44,180.05 and the Nifty soared 64 points to 12,938.25.

By: George Mathew | Mumbai, New Delhi | Updated: November 19, 2020 2:03:24 am
Pedestrians wearing protective masks walk past the Bombay Stock Exchange (BSE) in Mumbai, India, on Friday, March 27, 2020. (Photographer: Dhiraj Singh/Bloomberg)

The November bull rally, fuelled by the foreign portfolio investors, continued on Wednesday with the Sensex crossing the 44,000 level despite lingering worries about the recovery in the economy and rising Covid-19 cases. The benchmark Sensex rose 224 points to 44,180.05 and the Nifty soared 64 points to 12,938.25.

In fact, in the 13-trading sessions of November, the Sensex at BSE has risen 4,565 points, or 11.5 per cent, and breached three milestones in a matter of seven trading sessions as it rose to close above the 44,000 mark for the first time on Wednesday.

The sharp rally that has coincided with successive announcements of vaccines by three players — Pfizer & BioNTech, Moderna and Russia’s Sputnik V — also came as a shot in the arm for equity investors as it revived sentiments around global recovery.

At a time when the global markets are flush with liquidity, while the news of vaccine led to a rise in premier indices in developed markets, it also led to a higher equity allocation by foreign portfolio investors (FPIs) in emerging markets, thereby resulting in gains for them as well.

It is important to note that the 4,565-point rally in Sensex over the 13-trading sessions of this month has been primarily driven by FPI inflows as they pumped in a net of Rs 39,857 crore into domestic equities in the month of November, till date.

Domestic institutional investors (DIIs), on the other hand, have been in profit-booking mode as in November itself they pulled out investments worth a net of Rs 29,729 crore from domestic equities. Even on Wednesday, according to the provisional data available at the BSE, while FPIs invested a net of Rs 3,072 crore, DIIs sold investments worth a net of Rs 2,789 crore from Indian equities.

“Markets have been maintaining the momentum despite overbought conditions and it’s largely due to noticeable buying by foreign investors,” said Ajit Mishra, VP—research, Religare Broking.

Vinod Nair, head of research at Geojit Financial services, said, “The market trend is shifting from defensive to growth stocks. FMCG, pharma and IT sectors, which are the best performers of the year, are being shed for sectors like auto and banks. It is anticipated that such stocks will re-rate due to the rise of the economy and shift of investors’ money. We feel that a lot is factored in the prices, it is advised to turn a bit cautious, in the short-term.” This trend can reverse when the market realises that the economy and money can take a breather from pent-up demand and premium valuation, due to rise in Covid 19 and international restrictions, he added.

The November rally also witnessed two separate trends during the month. If the premier index Sensex was the big gainer of FPI inflows in the first seven trading session of November, rising by 9 per cent, the last six trading sessions saw a much broader participation and the mid and small cap indices at BSE outperforming the Sensex. Between November 11 and November 18, the mid and small cap indices have risen 5.1 and 5.4 per cent, respectively, as against Sensex gain of 2.1 per cent.

On Wednesday, while the Sensex rose 0.5 per cent, the mid and small cap indices at BSE rose 1.2 and 0.9 per cent, respectively. Amongst the sectors, banks, auto and capital goods saw a noticeable surge while others like FMCG, healthcare and IT were laggards.

Global shares were subdued on Wednesday as soft US retail sales fuelled worries that rising coronavirus cases could choke a still fragile economic recovery, dampening the euphoria from vaccine trial breakthroughs, said Deepak Jasani, head of research, HDFC Securities.

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