Nifty, Sensex at 2-yr highs; but macro woes may curb rise

Moneycontrol Bureau

Key equity indices rose for the second consecutive session to finish at two-year highs Wednesday, as investors across the globe cheered the resolution of the US fiscal crisis. (Key points)

The Nifty closed at 5993, up 42 points after touching 6006 intra-day. This is the first time in two years that the index has topped the psychological 6000-mark. The Sensex closed 19714, up 133 points over the previous close.

Capital goods, oil & gas, banking and automobile shares were among the star performers of the day, while investors continued to trim positions in defensive sectors like IT, FMCG and pharma.

BHEL, GAIL, Maruti Suzuki, Sterlite and ICICI Bank were the key gainers among frontline shares, rising between 1-3 percent.

The mood in the stock market is upbeat even as the Finance Minister termed the latest current account deficit (CAD) as "worrying" and said the government was considering curbs on gold imports, among other things, to narrow the gap. (Read More)

Experts say the current upswing is being driven by reasons of sentiment and liquidity, and may not sustain in the backdrop of weak economic fundamentals and expensive stock valuations.

"I am not as optimistic about 2013 as I was about 2012," Madhusudhan Kela, Chief Investment Strategist at Reliance Capital told CNBC-TV18 in an interview.

"There is a widespread consensus among major domestic and foreign fund houses that 2013 is going to be extremely good. The first quarter might be very positive but I don't rule out the market giving up 10-15 percent of its gains in the next quarter," he said, adding he was struggling to find 20-30 good stocks to invest in because of high valuations.

And while few expect any nasty surprises during the third quarter earnings season, there may not be much to cheer about as far as revenue growth is concerned.

"We believe that revenue growth will remain under pressure due to weak consumer sentiment and sluggish investment cycle. Slower volume growth is likely to constrain revenue expansion, mainly in sectors such as automobiles, FMCG, capital goods and metals," said Mukesh Agarwal, President, CRISIL Research.

However, he said operating margins could be steady on lower input costs and other cost control measures by companies.

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