NEW DELHI: Buying in banking and financials lifted benchmark indices to fresh record highs as they broke out of the narrow range they were trading in for a while now. Better-than-expected Q3 earrings and a dip in inflation helped the market sentiment.
The market had entered a consolidation phase last week but still, all dips were being bought. Now if the breakout sustains, the indices are primed for another leg of the rally, given FIIs continue to be bullish.
“CPI inflation for Jan at 4.06 per cent and the rebound in IIP are positive news for the market. The Nifty Bank Index is up by 15.5 per cent this year compensating for the relatively poor performance in 2020. The important takeaway from this and other important data pertaining to credit growth, IIP, electricity consumption, Eway bills, GST collections and sales of commodities like cement and autos is that the growth recovery is gaining momentum,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“If this trend is sustained, corporate profits will surprise on the upside in FY 22, bringing the stock valuations down. Rising crude price is an area of concern.”
Factors driving markets
Inflation down: Retail inflation in India seems to be coming under control, rising hopes of a longer tenure of the RBI’s accomodative stance on monetary policy.
US bond yields rise: On Friday, benchmark US Treasury yields rose to their highest levels since March, while inflation expectations edged up to a six-year high.
Stimulus hopes grow: US President Joe Biden pushed for the first major legislative achievement of his term on Friday, turning to a bipartisan group of local officials for help on his $1.9 trillion coronavirus relief plan. US Treasury Secretary Janet Yellen on Friday urged G7 finance leaders to “go big” with additional fiscal stimulus to recover from the COVID-19 pandemic.
How bluechips are doing
After opening in the green, benchmark indices strengthened their lead. At 9:44 am, BSE flagship Sensex was up 483 points or 0.94 per cent at 52,027. NSE benchmark Nifty followed and added 125 points or 0.82 per cent to 15,288.
In the 50-share pack Nifty, IndusInd Bank was the biggest gainer, up 2.45 per cent. Axis Bank, HDFC, Bharti Airtel, ICICI Bank, HDFC Bank, SBI and Kotak Mahindra Bank were among other gainers.
SBI Life Insurance was the top loser in the pack, down 0.99 per cent. Indian Oil, NTPC, ONGC, Tata Steel, Grasim Industries, Coal India and M&M were other losers in the pack.
Broader market indices traded with gains but underperformed their headline peers in morning trade. Nifty Smallcap was up 0.45 per cent while Nifty Midcap added 0.53 per cent. Broadest index on NSE, Nifty 500 was up 0.79 per cent.
Chola Finance, M&M Financials, Shriram Transport Finance, Deepak Nitrate Linde India and HEG Infra were among major gainers from the space while Timken India, Affle India, Dixon Tech, Amara Raja Batteries, Indiabulls Housing Finance and Dhani Services were under selling pressure.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.4 per cent to 736.4. Japan’s Nikkei climbed 1.1 per cent, despite data showing the country’s recovery from its worst postwar recession slowed in the fourth quarter.
Australia’s benchmark index added 0.9 per cent, while the E-mini futures for the S&P 500 were up 0.3 per cent in early Asian trading.