India’s stocks are enjoying a ride at all-time-highs this December in an eye-popping run that has taken the country’s market capitalisation to a record $4.22 trillion.
Both Indian benchmark indexes registered record closes for a third straight day on Wednesday, with the NSE Nifty 50 rising 0.40% and the BSE Sensex index rising 0.52%.
BSE reported an all India market capitalisation of 351 trillion rupees, or more than $4.22 trillion.
Both indices started the month on a high after edging past September peaks in a sharp up-move on December 1. The rally picked up on Monday after India’s ruling Bharatiya Janata Party (BJP) secured key victories in three out of four state assembly elections, ahead of the upcoming general election in 2024.
“The strong macroeconomic data, favourable political outcome from state assembly elections and improving global environment has moved sentiment to risk-on from risk-off,” Gaurav Dua, senior vice president and head of capital market strategy at Sharekhan, told Reuters.
“The party in Indian equity markets will go on,” he added.
And the party did, indeed, go on, backed by Indian technology and energy firms.
Energy, tech, financial sectors back rally
The Nifty energy index climbed 1.55% to a new record, aided by a drop in crude oil prices to a five-month low amid doubts over OPEC+ supply cuts and China’s demand recovery.
IT companies, which earn a significant share of their revenue from the US, gained 1.67% on the day. Tech firms were tracking a rise in Asian technology peers, after softer-than-expected labour market data raised rate cut expectations in the United States.
“The recent drop in crude oil prices alleviates concerns about inflation resurgence,” said Jaykrishna Gandhi, head of business development – institutional equities, at Emkay Global Financial Services.
“Anticipation of a US interest rate cut early next year can further fuel foreign inflows, reinforcing market momentum,” Gandhi added.
The rally has also been backed by financial services-linked indexes like financials, banks, public sector banks and private banks.
Inflows in those indexes have been fuelled by several brokerages picking financials and large-caps as their top preferences, anticipating a rally in domestic equities ahead of the 2024 general election.
High-weightage financials fell 0.14% on Wednesday after rising in the last eight sessions.
‘Weak rally’ concerns
Mid-cap stocks registered a 0.25% rise on Wednesday, while small-caps added 0.38%.
“There is gradual realisation that valuations are quite rich in small- and mid-caps, which could add to inflows into large-caps,” Dipan Mehta, director at Elixir Equities.
But some analysts are concerned that the upmove may not last too long.
“The current rally seems weak as mid and smallcaps continue to underperform,” Aditya Gaggar, Director of Indian brokerage Progressive Shares, told publication India Today.
Both Nifty and Sensex are also settled in the overbought zone now, with the Nifty’s relative strength index hitting its highest since September 16, 2021.
The Nifty 50 index is up more than 15% for the year so far, and a stone’s throw away from the key psychological level of 21,000.
BSE Sensex is up near 14% for the year, nearing a key milestone level of 70,000.
- Vishakha Saxena, with Reuters