Indian markets extended their gains and hit a new record high again on Thursday. The PLI plans for the automotive sector, the telecommunications aid plan and the early announcement of guarantees for the bad bank were key factors that pushed the markets up.
The Sensex hit the 59,000 mark for the first time. The 30 equities index rose 417.96 points or 0.71% to 59,141.16. The closed Nifty gained 110.05 points or 0.63% to 17,629.50.
Asia-Pacific stocks were broadly lower on Thursday, with China’s Shanghai composite falling 1.34%, while Hong Kong’s Hang Seng index fell 1.46% and Japan’s Nikkei fell 1.34%. lost 0.62%.
According to Vinod Nair, head of research at Geojit Financial Services, the recovery in Indian markets is mainly due to heavy purchases of bank stocks, especially in the public banking sector. âThe banking sector should perform well in the coming days, as the sector which has failed to participate fairly in the current rally due to fears over asset quality is gaining ground. Asian markets traded with lows as falling Chinese real estate stocks pushed Asian stocks lower while European markets traded with positive sentiments, “he said.
There have been a slew of government announcements to address issues in struggling industries such as banking, autos and telecommunications. The government seeks to get rid of ??2,000 billion bad debts over the next five years and has provisioned ??Guarantee of 30,600 crore to back up security receipts issued by the new National Asset Reconstruction Company Ltd (NARCL) against stressed assets.
Analysts believe that although Indian markets have seen a massive recovery, there is still room for expansion.
Amit Shah, Head of India Equity Research at BNP Paribas, said: âThe current market strength looks sustainable as we are seeing global inflows into emerging markets. The dollar index is very stable thanks to the increase in FII flows. The unintuitive local money that was left out due to the Initial Public Offerings (IPOs) is now back and looks sustainable. Finally, the vaccination rate is very encouraging, which allows for a more sustainable economic recovery. There may be some nervousness in the market as the US Federal Reserve begins to decline, but overall the market is well positioned to absorb that as well. “
To be sure, the Indian benchmark Sensex and Nifty has risen 23-25% this year so far, while the MSCI World index is up 16% and the MSCI EM is down 0 , 2%.
The IFIs have injected $ 790.57 million in September so far, while investing $ 7.94 billion in stocks this year. However, domestic institutional investors have lagged behind. They were net sellers of stocks worth ??237.57 crore this month but net investor of ??22,126.18 crore in 2021 to date.
However, Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services Ltd, believes markets can be volatile due to fragile global signals, concern over slowing economic growth and the increase in cases of the Delta variant worldwide. âInvestors are cautious ahead of the Federal Reserve meeting next week, awaiting indications of when the central bank will start withdrawing its monetary stimulus and possibly start raising interest rates. Valuations are also rich and could therefore lead to episodes of profit reservation. But overall sentiment in the domestic market remains optimistic, given the continued improvement in macroeconomic data points and positive earnings expectations, âhe said.
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