Modi Gives Indian Markets What Even Rajinikanth Can’t!
The Dalal Street frenzy is more than a pre-poll rally. Across global markets, money is moving from bonds to equity with India attracting a fat slice. And, the market is hitting new highs despite huge selling by large local investors. “It’s a story of high liquidity and low floating stock. Buybacks, open offers and absence of IPOs have shrunk available stocks while certain sectors such as banks were oversold,” said Edelweiss Capital Chairman Rashesh Shah on Monday, when the Sensex closed above 22,000 for the first time.
Punters took hectic derivative positions, betting that the market would chug ahead. The Sensex surged 300 points (or 1.38%) to 22,055, its highest closing. The broader NSE Nifty rallied 88 points, or 1.36%, to end at a record 6,583. “People are underinvested…HNIs are beginning to invest, retail money is yet to come in,” said Shah.
Buoyed by hopes that RBI Governor Raghuram Rajan will hold rates and maintain a dovish tone in the April 1 monetary policy, shares of HDFC Bank and ICICI Bank led the rally. Oil & Gas Stocks Like ONGC, GAIL Fuel Rally
Oil and gas stocks such as ONGC and GAIL, where investors are betting on generous interim dividend, fuelled the rally. People like Tai Hui, JPMorgan Asset Management’s Asia strategist, believe RBI “is done for now in terms of hiking interest rates”. Since mid-February, FIIs have pumped in nearly . 18,500 crore into equities. On Monday, they bought stocks worth . 1,465 crore. “Activity in the derivatives segment of the market attested to a continuation of Monday’s rally,” said Siddharth Bhamre, derivatives head, Angel Broking. Option writers or sellers sold huge numbers of ‘put options’ — an indication of their confidence that markets are unlikely to dip from current levels. This is borne out by FII net sales of index options worth . 780 crore.
Defensive sectors such as pharma and IT were under pressure with Wipro ending 0.98% lower at . 563 and Dr Reddy’s closing 1.34% down at . 2,749.
Here, the bet is that a stable government would strengthen the rupee and squeeze exporters’ earnings. “The markets are expecting a decisive mandate in the general elections, and if results are favourable, then Nifty can touch 7,500 over next 12 months,” said Motilal Oswal, chairman at brokerage Motilal Oswal Financial Services. The market sentiment turned positive ever since opinion polls suggested that Bharatiya Janata Party (BJP) may win 210-230 seats in the parliamentary elections. Global investors such as Goldman Sachs recently upgraded India to ‘overweight’ from ‘market weight’ and has raised Nifty’s target to 7600.
The brokerage expects domestic fundamentals to improve on recovery of economic growth in April-June quarter (Q1 of FY15), and views mid-teens corporate earnings growth this year and next year.
“Markets are rising only based on India’s economic fundamentals, which are the best in the world currently,” said Shankar Sharma, chief strategist, First Global.
“However, the real risk for the markets will be post elections as BJP may find it difficult to manage allies. If there is a BJP-led coalition government at the Centre, it would be fragile. Even if NDA gets 220 seats, which is the average consensus among analysts, they would have to make do with difficult allies.”
Punters took hectic derivative positions, betting that the market would chug ahead. The Sensex surged 300 points (or 1.38%) to 22,055, its highest closing. The broader NSE Nifty rallied 88 points, or 1.36%, to end at a record 6,583. “People are underinvested…HNIs are beginning to invest, retail money is yet to come in,” said Shah.
Buoyed by hopes that RBI Governor Raghuram Rajan will hold rates and maintain a dovish tone in the April 1 monetary policy, shares of HDFC Bank and ICICI Bank led the rally. Oil & Gas Stocks Like ONGC, GAIL Fuel Rally
Oil and gas stocks such as ONGC and GAIL, where investors are betting on generous interim dividend, fuelled the rally. People like Tai Hui, JPMorgan Asset Management’s Asia strategist, believe RBI “is done for now in terms of hiking interest rates”. Since mid-February, FIIs have pumped in nearly . 18,500 crore into equities. On Monday, they bought stocks worth . 1,465 crore. “Activity in the derivatives segment of the market attested to a continuation of Monday’s rally,” said Siddharth Bhamre, derivatives head, Angel Broking. Option writers or sellers sold huge numbers of ‘put options’ — an indication of their confidence that markets are unlikely to dip from current levels. This is borne out by FII net sales of index options worth . 780 crore.
Defensive sectors such as pharma and IT were under pressure with Wipro ending 0.98% lower at . 563 and Dr Reddy’s closing 1.34% down at . 2,749.
Here, the bet is that a stable government would strengthen the rupee and squeeze exporters’ earnings. “The markets are expecting a decisive mandate in the general elections, and if results are favourable, then Nifty can touch 7,500 over next 12 months,” said Motilal Oswal, chairman at brokerage Motilal Oswal Financial Services. The market sentiment turned positive ever since opinion polls suggested that Bharatiya Janata Party (BJP) may win 210-230 seats in the parliamentary elections. Global investors such as Goldman Sachs recently upgraded India to ‘overweight’ from ‘market weight’ and has raised Nifty’s target to 7600.
The brokerage expects domestic fundamentals to improve on recovery of economic growth in April-June quarter (Q1 of FY15), and views mid-teens corporate earnings growth this year and next year.
“Markets are rising only based on India’s economic fundamentals, which are the best in the world currently,” said Shankar Sharma, chief strategist, First Global.
“However, the real risk for the markets will be post elections as BJP may find it difficult to manage allies. If there is a BJP-led coalition government at the Centre, it would be fragile. Even if NDA gets 220 seats, which is the average consensus among analysts, they would have to make do with difficult allies.”
Source: The Economics Times
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