Indian Stock Indices Soar to Record Highs

Indian stock indices continued their uptrend from the past week and opened at fresh record highs at the opening bell on Monday, a day after Prime Minister Narendra Modi and his Union Council of Ministers took the oath of office. A smooth transition in the government formation seemed to have boosted market sentiments.

At the time of filing this report, the Sensex was at 76,890.34, up 0.3 percent, and the Nifty was at 23,372 points, up 0.4 percent. They hit their record highs at 76,960.96 points and 23,411.90 points, respectively, at opening today. Most of the sectoral indices were in the green.

As the week progresses, analysts believe that investors will keep an eye on the upcoming US Fed interest rate decision, India’s inflation data (both retail and wholesale), and decisions of the new government. Allocation of ministry portfolios to the newly sworn-in ministers will also be keenly tracked by markets.

India’s retail inflation eased to 4.83 percent in April, down from 4.85 percent in March. However, consumer food price inflation surged to 8.70 percent from 8.52 percent last month. While retail inflation in India remains within the RBI’s 2-6 percent comfort level, it is above the ideal 4 percent scenario.

“…global cues, particularly the upcoming US Fed meeting, will be closely watched by participants. The recovery following the post-election decline suggests resilience among participants, and we expect the prevailing tone to continue,” said Ajit Mishra, SVP, Research, Religare Broking Ltd.

“The renewed participation of sectors like IT and FMCG, which were previously on the sidelines, supports our confidence. However, traders should remain cautious and focus on stocks that are moving in line with the benchmark,” Mishra added.

“Next week’s focus will be on the allocation of key cabinet portfolios such as Finance, Defense, Roads, Energy, Commerce, and Railways. The market will continue to be volatile with upward biasedness,” said Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services Ltd.

Dalal Street was expecting a historical spurt in the benchmark indices after the exit poll but failed to anticipate the sharp decline the very next day. On June 4, the poll results day, the market witnessed a bloodbath when the Sensex declined by a whopping 4,389.73 points while the Nifty fell by 1,379.40 points.

Indian stocks plummeted on the day the Lok Sabha results were announced, where the incumbent BJP performed below expectations and seemed it might fall short of exit poll predictions and the majority mark on its own. However, the National Democratic Alliance (NDA) managed to secure a comfortable majority eventually.

Many investors booked their profits accumulated from the gains made a day after the exit poll predictions indicated a comfortable majority for BJP. All the losses incurred on June 4 have been recovered over the next couple of sessions, and the indices are again at their record highs.

“After the roller coaster ride last week, the market is likely to take a breather in the near-term. It is important to understand that the major driving force in this bull market is the Indian retail investors, including HNIs. Big selling by FIIs is getting eclipsed by the aggressive buying of DIIs and retail investors. The fact that retail investors bought equity for Rs 21,179 crores on June 4, the day Nifty tanked 5.9 percent, indicates the buying power and optimism of the retail investors,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

“This is a structural long-term trend. FII selling on concerns of high valuations will be easily absorbed by DII plus retail buying. So, if FIIs swim against this trend, they will underperform in one of the best-performing stock markets in the world. That said, retail investors should not chase highly valued mid and small caps. Safety is in large caps,” he added.