Nifty posts biggest gain in over four months
The benchmark Nifty index on Thursday posted its biggest single-day since May 25 to close decisively above the psychologically-important 10,000 level. The gains were led by a near four per cent rally in index heavyweight Reliance Industries, which closed at a new lifetime high. The 30-share Sensex gained 348 points, or 1.1 per cent to close at 32,182, after climbing to 32,210 during intra-day.
The Nifty closed at 10,096, less than 60 points, or 0.6 per cent shy of a new record high. The gains were also supported by positive global cues with the US equities closing at new record high and Japanese market recorded their highest level in two decades.
Nifty had hit a lifetime high of 10,153 on September 18 following which the index had come off four per cent amid concerns over slowing economic growth and global risk-off due to US Federal Reserve’s decision to shrink its balance sheet. The rebound in the market has been on the back of strong buying by domestic mutual funds even as overseas investors have continued to take money off the table.
On Thursday, foreign institutional investors (FIIs) sold shares worth Rs 668 crore, while the domestic institutions bought equities worth Rs 872 crore, provisional data from stock exchanges showed. Since August, FIIs have sold shares worth Rs 20,000 crore, while MFs have pumped in close to Rs 50,000 crore.
Going ahead, the market performance could be muted due to the huge line up of new equity offerings and also uncertainty surrounding September quarter earnings.
GIC Re’s Rs 11,400 crore IPO, India’s third largest IPO, closed on Friday. The government has lined up two more Rs 10,000-crore plus offerings that of New India Assurance and Bharat-22 ETF in the subsequent weeks. The big-ticket offerings come amid sell-off by foreign institutions.
“We are going to see an unprecedented supply of fresh paper hitting the market over the few weeks. This could negatively impact the secondary markets. There is a major risk-off among overseas investors. Domestic investors may to redeem some of their investments to participate in the new offerings,” said an official with a foreign brokerage asking not to be quoted.
In a recent note, influential brokerage CLSA had said that the Indian markets will remain flat in the remaining part of the year due to weak FII flows and big IPO line up.
“Going forward, we expect another $ 4 billion of supply over the next three months, and as such, higher foreign flows would be needed to support the market. Foreign flows are unlikely to improve in the near term, as earnings momentum in the rest of Asia is far better than that in India and valuations are cheaper,” said Mahesh Nandurkar, India Strategist, CLSA.
Reliance Industries alone contributed to nearly a third of gains in the benchmark indices on Thursday. Market players said the rally was on account of attractive new plans unveiled for by its telecom subsidiary Jio. Shares of another technology major TCS gained two per cent ahead of their result announcement. Shares of Axis Bank, Adani Ports and Hindustan Unilever gained 1.7 per cent each.
The ongoing earnings season is also not expected to provide an impetus to the markets as analysts are expecting single-digit growth numbers for the quarter ending September. Even on the macroeconomic front as well, there are several headwinds. The GDP growth numbers have been less than expected while the small and medium enterprises are still reeling under the impact of Goods and Services Tax (GST).
“The small and mid-cap companies will continue to feel the earnings pain for at least another two quarters. Data on the economic front is also not looking positive. Such situations are bound to have an impact on stock movement. In this context I think large-cap stocks would provide a safer bet to the investors than the mid- and small-caps,” said G Chokkalingam, founder, Equinomics Research and Advisory.