Updated: August 4, 2021 1:34:47 am
RIDING ON the back of encouraging economic data that showed a recovery in the manufacturing sector index, higher GST collection and improved corporate earnings, India’s benchmark stock indices rallied to new peaks on Tuesday, with the Nifty index scaling the 16,000 level for the first time.
With European markets making good gains and the vaccination drive gaining ground in the country, the benchmark Sensex jumped 873 points to a new high of 53,823.36 and the NSE Nifty Index soared 246 points to close at 16,130.75 on all-round buying support.
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) moved back above the critical 50.0 threshold — up from 48.1 to 55.3 — in July, pointing to the strongest rate of growth in three months. On the other hand, India’s gross GST revenues in July recovered sharply to Rs 1,16,393 crore, after slipping below the Rs 1 lakh crore mark for the first time in eight months in June.
“Progressive economic data indicates strong rebound from impact of the second wave. All major domestic data like PMI index, GST collection, corporate earnings, export data, etc favour a strong recovery. This has added euphoria in the domestic market reaching new highs, along with context to a drop in global risk after the accommodative monetary and fiscal policy announcements. A similar monetary policy is expected from the RBI policy meeting,” said Vinod Nair, head of research, Geojit Financial Services.
Even as markets are trading at all-time highs, experts feel they are expected to trade higher. “I see the momentum continuing. While the fundamentals of the economy remain strong, over the last few months, the collections for banks and financial services companies have been closer to normal and that has given additional comfort to the markets,” said Pankaj Pandey, head of research at ICICIdirect.com.
Momentum may continue
Deriving comfort from good first quarter earnings, PMI growth and lower-than-expected impact of the second Covid wave, the premier indices rose to close at new highs on Tuesday. If fundamentals of the economy remain strong, experts believe the market momentum is likely to sustain.
While the first quarter earnings provided support, the market also got comfort from the less-than-expected impact of the second Covid wave and the consequent lockdowns in April and May as compared to last year.
The bull rally has been led by technology, financial services and FMCG stocks as economic indicators pointed to a recovery in demand. Besides, management commentaries across the board suggest an improved demand environment post-June 2021, led by the easing of restrictions, lower active Covid-19 cases and a pick-up in vaccinations.
“We estimate corporate earnings to continue to recover, as the underlying economy opens up, with progressively higher vaccination trends, thus offering many bottom-up opportunities,” said Sneha Poddar, Assistant Vice President, Motilal Oswal Financial Services.
According to Ajit Mishra, Vice President, Religare Broking, Nifty finally ended its two-month long consolidation phase and tested a new milestone of 16,000 level. “The bias was upbeat from the beginning and buying in select index majors pushed the benchmark higher as the day progressed. Further, short covering in the latter half triggered sharp momentum in the last hour of the trade,” Mishra said.
On the sector front, majority of the stock indices ended in green except for media and metals. Foreign investors were buyers to the tune of Rs 2,116 crore on Tuesday.
The Nifty’s journey past the 16,000 level has been led by retail investors who allocated more into equities even as foreign investors sold stocks worth over Rs 10,000 crore in July. “The present rally is all the more significant since it provides enough opportunities to the new investor coming in now as several pockets of the economy still offer value going forward,” said S Ranganathan, head of research at LKP Securities.
Asian stocks were mostly negative on Tuesday as the Delta variant spread in key regions and Chinese officials took aim at videogame producers, once more rattling investor confidence in the mainland’s markets. However, in Europe, strong earnings updates from oil major BP, banks and others drove European stocks to record highs.
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