Stock Market Update: The NSE Nifty soared to an all-time high of 20,008 during Monday’s trading session, marking a notable 36-session gap since its last peak. Remarkably, it took 52 sessions for the 50-stock index to surge from 19,000 to 20,000. Simultaneously, the BSE Sensex crossed the 67,000 milestone.
Market analysts attribute this impressive rally in key benchmark indices primarily to widespread participation across Indian indices. They point to consistent investments from Foreign Institutional Investors (FIIs), Domestic Institutional Investors (DIIs), and Indian retail investors as the driving force behind the record highs in Indian markets. Additionally, experts note that the successful G20 summit has drawn global investors’ attention towards the Indian market, further fueling its recent bullish run.
FII Inflows Explained
Saurabh Jain, Vice President of Research at SMC Global Securities, attributed the Nifty’s ascent to 20,000 to a series of factors. He noted, “Continuous investments from Foreign Institutional Investors (FIIs), mutual funds, and various Domestic Institutional Investors (DIIs) have fostered a broad-based rally in the Indian stock market. In recent months, we’ve observed consistent surges in stocks across the spectrum, from small-cap to mid-cap to large-cap. Notably, retail investors significantly bolstered market liquidity when FIIs were divesting in early 2023 and late 2022. This substantial influx of capital contributed to a substantial surge in Indian indices upon FIIs’ return to the Indian market.”
G20 Influence
Commenting on the impact of the G20 summit on the current market rally, Kaushik Dani, Fund Manager – PMS at Abans Investment Managers, stated, “The resounding success of the G20 summit has injected the much-needed momentum into the market. Market valuations have yet to surpass previous peaks. Enhanced bilateral trade prospects are set to benefit various sectors, such as pipes and cables. Additionally, industries like Railways, Shipping, and Logistics stand to gain directly from recent announcements. With corporate earnings strengthening, the indices appear well-positioned to advance in the short to medium term.”
“Market Optimism Soars as Nifty Breaks 20,000; Gazing at 20,500 This Month.” The positive outlook for the Indian economy, particularly after its impressive performance at the G20 summit, is propelling the current market rally. Given the previous underperformance of the small-cap sector from 2018 to 2022 and subsequent earnings growth, we believe that select mid and small-cap stocks still hold potential, considering their improved revenue outlook,” stated Manish Chowdhury, Head of Research at StoxBox.
“Nifty Secures Long-Awaited 20,000 Milestone on Its Second Attempt Since July 2023.” Robust investments from domestic investors, coupled with mixed/negative foreign flows, have propelled Nifty to this milestone. India’s recent achievements in space and foreign diplomacy have bolstered sentiment toward Indian stocks, especially in a global landscape that remains uncertain. Small-cap and mid-cap stocks have experienced significant run-ups, sometimes without clear justification. Consequently, it is advisable to review asset allocation, book profits, and consider raising cash,” advised Dhiraj Relli, MD & CEO of HDFC Securities.
India’s Advantage Over China and Brazil
Explaining why Foreign Institutional Investors (FIIs) are pouring funds into the Indian markets, Avinash Gorakshkar, Head of Research at Profitmart Securities, noted, “As FIIs seek safe havens amid lingering inflation concerns in US equities, they are turning to emerging markets. Among these markets, China, Brazil, and India have remained favored destinations. However, China’s opacity following the COVID-19 pandemic and Brazil’s political instability have made India an attractive choice for FIIs. Consequently, FIIs have been increasingly bullish on Indian markets, buying at levels above their previous selling points, supported by Domestic Institutional Investors (DIIs) during periods when FIIs were net sellers.”
Participatory Rally
Regarding the sectors driving the Nifty, Sensex, and other indices to record highs, Saurabh Jain commented, “Many sectors have witnessed substantial rallies in recent months, but capital goods, power, Public Sector Undertakings (PSUs), and real estate have outperformed other segments.” He suggested considering fresh investments in power and capital goods stocks after a 7-10 percent correction from current levels, as these themes are expected to maintain their momentum in the short to medium term.
Stock Market Strategy Post-Nifty’s 20,000 Milestone
In light of Nifty reaching the 20,000 mark, Saurabh Jain from SMC Global recommended a prudent stock market strategy. He advised, “With the markets at their peak, those seeking to maximize returns should consider taking partial profits. This allows them to have resources available for future buying opportunities when profit-taking triggers lower levels. Given that many stocks are currently trading at elevated levels, their potential for further upside may be limited, so selective buying is advisable.”
“We suggest that investors closely monitor the large-cap segment, as the risk-reward balance has turned in favor, especially within the IT sector and with significant players such as Reliance Industries,” HDFC Bank, and ITC. The market’s overall tone remains positive, and we advocate a strategy of buying on dips for new investors. As for the index hitting the 21,000 level, we believe it would be premature to chase such rapid upside in the short term and suggest a reevaluation of the market “Manish Chowdhury of StoxBox advised that a reassessment of conditions should be considered at the close of the month.”
