Indian financial markets received positive investor sentiment again as the Sensex today (31st October) surged to over 40,000 after staying low for about five months. Sensex hits record high of 40,392, beating 40,312 of July 4. The index climbed 340 points within a day.
The positivity in the markets was lifted by interest rate cuts by the US Federal Reserve, expectations of further reforms in taxation, and stake sales in the PSU sector. The Nifty index also climbed to 11,945 during the day.
The Sensex now (31st October) settled at 40,129, up by 77 points. This was the second Sensex all time high close. The Nifty was also up by 0.28 percent.
Naveen Kulkarni from Reliance Securities said that the market is definitely in the green because of the upward push in demand during the festive season and the corporate tax cuts, which has increased earnings of companies. The head of research said that he had targeted 12,800 points for the Nifty by April 2020.
Yes Bank was the top gainer of the day (31st October) whose share rose by 35 percent. This came after the private lender confirmed that it would be receiving $1.2 billion of investment from a global investor against fresh equity shares.
PSU banking stocks also rose during the day, with SBI gaining 8 percent. The Nifty PSU banking index performed likewise, gaining about 4 percent, with Allahabad Bank share increasing by 5 percent and Central Bank stock climbing 12 percent.
Other stocks that were in the green along with SBI in Sensex were Tata Motors, which gained 3.5 percent, HCL Tech, which gained 1.5 percent and Infosys, which gained 4 percent.
Sanjiv Bhasin from IIFL Securities said that the current rally in the index is due to strategic disinvestments, tax cuts, and higher than expected earnings of some market giants. He added that the Nifty could reach 12,000 to 12,400 in the near future.
Sentiment in the global economy remains positive. Wall Street surged overnight as the US Federal Reserve reduced the interest rates further this year but said that more cuts are unlikely unless the economy worsens. The Federal Reserve Chairman Jerome Powell said in a statement that further rate cuts are unlikely to be imposed as the US economy has other areas of strength. Powell said in a news conference that the economy has high consumer spending, strong home sales, and reasonable asset prices, which are indicative of a well-performing economy.
While the indexes rose rapidly during the day, many see it as a “hope rally” since they were gained from a handful of stocks only. This comes as, amidst the positivity as the Sensex hits record high, the BSE Smallcap index fell 10 percent, and the BSE Midcap index dropped 3.3 percent in a five-month period.
Only a little over 30 percent of the stocks in the BSE500 Index rose in the five-month period, during which the index grew over 40,000. Half of those 30 percent produced double-digit gains. These included Adani Green Energy, Abbot India, Shipping Corporation of India, Berger Paints India, HDFC Asset Management Company, Avenue Supermarts, Reliance Nippon Life Asset Management, etc.
On the other hand, over 200 stocks experienced a double-digit decline during the time period. This was due to corporate governance, huge debts, and asset quality concerns. The losers list included RBL Bank, Laxmi Vilas Bank, Vodafone, Indian Bank, Yes Bank, and Coffee Day, among others.
The Sensex was also driven to its fresh high of all time essentially by 5 to 6 stocks, including ICICI Bank, Asian Paints, Bajaj Finance, HUL, and Reliance Industries. However, stocks that lost a significant amount of their value during the time include Yes Bank, Coal India, SBI, Tata Steel, Infosys, and ONGC.
Experts believe that the Sensex would experience a broader run when the time lag between policy changes by the government and their actual impact on the economy’s growth and performance is covered.
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