Benchmark stock market indices Sensex and Nifty surged 1.6 per cent to end at record high Thursday after the RBI announced a record surplus transfer of Rs 2.11 lakh crore and on heavy inflows from foreign portfolio investors (FPIs). The BSE’s Sensex scaled 1196.98 points, or 1.61 per cent to end at a record high of 75,418.04. The Nifty climbed 369.85 points, or 1.64 per cent, to close at an all-time high of 22,967.65. According to some market analysts, the higher dividend payout by the RBI to the government is also because of the confidence that the ruling BJP will again come to power. “The interest rate in the US has gone up from 0 per cent to 5.25-5.5 per cent. With the forex reserves holding of $645 billion, the rise in the RBI’s earnings is substantive. The timing and the amount (of the surplus to the government) are definitely part of a well thought-out plan. It indicates that the present government will continue,” said a market analyst, who did not want to be identified. The RBI’s earnings have been robust in recent times. It has been earning around 3 per cent on its forex reserves. The central bank has been lending in the money market around 1.5-2 lakh crore daily, on which it charges 6.5 per cent. It is also earning from trading in the forex market, the analyst said. “The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued large caps,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. On Wednesday, the RBI board had announced the transfer of Rs 2.11 lakh crore of surplus to the government for the year 2023-24. The amount was much higher than both the budgeted (Rs 1.02 lakh crore announced in the Interim Budget for FY2025, including dividends from banks and financial institutions) and the market expectation of Rs 1-1.1 lakh crore surplus. The bumper payout is seen as helping the government narrow the FY2025 fiscal deficit by 0.2 to 0.4 per cent range, market experts said. The government has set an ambitious target of bringing down the fiscal deficit target to 5.1 per cent of GDP in FY25 from 5.8 per cent of GDP in FY24. “RBI record breaking dividend of Rs 2.1 lakh crore, nearly Rs 1.2 lakh crore more than expected, set the positive tone for Indian markets today. FIIs net buying came in at a many-week high of Rs 4,670 crores today. DIIs have been doing the heavy lifting for the last 2 months, if this FII buying becomes a trend we are in for some interesting times,” said market expert Ajay Bagga. After the RBI dividend announcement, the yield on 10-year government bond eased below 7 per cent. The fall in bond yield will help banks make treasury gains, especially public sector banks in the coming quarter. This helped the Nifty Bank and Nifty PSU Bank rise 2.06 per cent and 1.72 per cent, respectively. “If the election outcome aligns with current market expectations, we expect Nifty to reach new highs in the first week of June,” said Neeraj Chadawar, Head – Fundamental and Quantitative Research at Axis Securities. He suggested that investors should stay invested in the market and maintain good liquidity (10 per cent) to take advantage of market dips and gradually build positions in high-quality companies with strong earnings visibility with an investment horizon of 12-18 months.
