The S&P BSE Sensex added 1,000 points to its kitty in a matter of just 33 trading sessions to hit 32000 for the first time.
The S&P BSE Sensex added 1,000 points to its kitty in a matter of just 33 trading sessions to hit 32000 for the first time, while investors’ wealth on the BSE rose by Rs 5 lakh crore in the same period.
The index, which closed at 31,028 on May 26, 2017 rose to fresh record high of 32,054.33 on July 13, 2017. The total market valuation of all listed firms on the BSE had first hit Rs 1,25,63,812.15 crore on May 26, which rose to Rs 1,30,73,742, translating into gains of little over Rs 5 lakh crore.
The rally was not limited to Sensex, but was broad-based as eight stocks more than doubled investors’ wealth in the same period. Magnum Ventures rose by 545 percent followed by Goa Carbon which gained 157 percent, and Poona Dal rallied 133 percent in the same period.
A strong handover from firm Wall Street fuelled a rally in the Indian markets, apart from that rate cut hopes from the central bank after inflation numbers added to optimism.
Short covering arising out of unwinding of positions from foreign investors is supporting the rally along with flows from domestic institutional investors (DIIs).
Balanced, Equity and Equity Linked Savings Schemes (ELSS) saw strong net inflows of Rs. 7,458 crore, Rs. 7,453 crore, and Rs 711 crore, respectively. Equity funds (including ELSS) witnessed net inflows of Rs. 8,164 crore in June, said an ICRA report.
“The Sensex touched the psychological 32000 mark on July 13 aided by expectations of a rate cut (post the low CPI and IIP numbers announced on July 12), good monsoons and overcoming the fears of disruption due to the introduction of GST,” Deepak Jasani, Head – Retail Research at HDFC Securities told Moneycontrol.
“The latest 1000-point rally in the Sensex was driven by Reliance, large Pharma stocks, Bharti Airtel, ITC, and Maruti. Unlike in the past, banks & IT stocks did not contribute meaningfully to the latest rise. Local fund and non-fund inflows contributed to this rise,” he said.
Jasani further added that the rise in the markets has been aided by the risk-on sentiments prevailing across the globe. Valuations look stretched going by historical parameters; however, some more upside is possible in the coming few weeks.
What should investors do?
From an index point of view, things might not look rosy for the second half of 2017, but investors who have an investment horizon of more than one year could look at buying quality stocks on dips.
Jasani advised investors to avoid chasing stocks that are at steep valuations, but keep hunting for opportunities in the small/midcap space where promoters show genuine interest in improving shareholder value by restructuring their businesses/companies.
For investors who are under-invested in stocks, SIP in select equity stocks may be looked at, but Sensex could well turn flat from current levels. Some analysts have become vocal about stretched valuations of Indian markets.
Sanjay Mookim of Bank of America Merrill Lynch said MSCI India trades at a large P/E premium to Emerging Market (EM) even though earnings growth is not materially higher. This is driven by consumer-facing stocks and only partly explained by higher Indian return on equities.
There is also significant 'faith' foreign investors seem to have in the Indian consumption story, he feels. Mookim stayed cautious on market in the near term, saying December 2017 Sensex target is at 30,000.Follow @kshanand