Indian stock indices at record peaks as banking shares shine

Improving economic scenario along with healthy buying in banking sector stocks pushed India’s key equity indices at record highs on Tuesday.

Accordingly, the improving economic scenario as well as a small intra-day correction pulled in fresh foreign funds.

During the intra-day, some losses were witnessed in the media, metal, FMCG, auto, realty and pharma indices. However, banking, financial services and IT space traded in the green.

Besides, foreign institutional investors (FIIs) continued their holiday shopping and have relentlessly bought around Rs43,000 crore worth shares in December.

This continuous FII buying, barring one session this month, has supported the index at higher zones.

Sensex closed at 47,613.08, higher by 259.33 points or 0.55 per cent from its previous close.

The Nifty50 on the National Stock Exchange (NSE) closed at 13,932.60, higher by 59.40 points or 0.43 per cent from its previous close.

“Nifty opened gap up and saw continued strength towards the blue zone and registered a new all-time high of 13,967 in the initial hour,” said Jay Purohit, Technical & Derivatives Analyst, MOFSL.

“However, we witnessed some profit booking from higher levels. Overall advance decline ratio signals caution ahead but any decline could be an opportunity to participate in the rally.”

According to Gaurav Garg, Head of Research at CapitalVia Global Research: “Indian market opened with a gap up at 13,910.35 and hit another record high at 13,967.60.”

“The market saw a small correction thereafter, but the market rally is expected to continue backed by the support of inflows from foreign investors, with private-sector lenders gaining the most due to an improving economic outlook.”

Banking, which is among the few sectors still down this year, has been catching up with the broader market’s advance as foreign investors bet that a rebound in economic activity will benefit lenders.

The Nifty Bank index rose 1.23%, with HDFC Bank, the nation’s largest private-sector lender, gaining 1.3%. The stock was on track to finish higher for a fifth straight session.

“Large private-sector lenders have been proving themselves time and again with good asset quality and decent growth,” said Neeraj Dewan, director at New Delhi-based Quantum Securities.

“When foreign institutional investors come to buy, these lenders are normally on top of their list,” he said.

Meanwhile, Finance Minister Nirmala Sitharaman has been presiding over Indian stock markets’ biggest bull run in the last few months. Prime Minister Narendra Modi and Sitharaman are scripting what is easily the biggest wealth creation story in many years.

Sitharaman is a first time Finance Minister and just a year and a half into the job. Under her watch, India has seen the most tearing stock market frenzy since March of 2020 and one of the biggest wealth creation journeys for investors, domestic and foreign.

With the economy taking a hit due to the COVID- 19 pandemic, it is the unstoppable run in the stock markets which has made hundreds of thousands of new investors flock to it in Covid times.

Investors opened 3.4 million new demat accounts in the September quarter, as per data by the Securities and Exchange Board of India (SEBI).

While global factors like easy liquidity and central bank bailouts have certainly played a role it cannot be denied that the economy and markets are under the Finance Ministry’s watch.

The markets are unstoppable breaching new records every passing day and foreign inflows are a deluge.

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Not much credit has flowed North Block’s way for the market’s stupendous rally. The stock market is clearly buying the economic recovery story and India’s growth prospects as foreign institutional investors (FIIs) have made one of the largest bets in emerging markets in India.

For a newcomer to the Finance Minister’s job, Sitharaman in 2020 has a scorching record of equity markets highs which many of her illustrious predecessors in NDA and UPA governments have found elusive.

Foreign inflows into the Indian stock markets are not showing any signs of easing even during the holiday season of the month of December with inflows of more than $7.5 billion.

Over the past few years, December is seen as a month where foreign funds are not so active due to the holiday season internationally. November is usually a month where foreign funds press profits. Both of these have not happened this year.