Benchmark equity indices ended at record highs on Thursday led by gains in index heavyweights like Reliance Industries, SBI, HDFC Bank, ICICI Bank. Positive global market also boosted sentiments. The BSE benchmark Sensex closed 958.03 points or 1,63% higher at 59,885.36 after rallying over 1000 points to a fresh all-time high of 59,957.25, just 43 points away from the 60,000 mark.
The NSE benchmark Nifty50 index too moved closer to the 18,000 mark after rallying nearly 300 points to an all-time high of 17,843.90. The 50-share index finally settled 276.30 points or 1.57% higher at 17,822.95.
Broader indices, however, underperformed benchmark indices; the BSE Midcap index gained 1.28% while the BSE Smallcap index advanced 0.91%. Market breadth was positive today. Out of the 3,403 shares traded on the BSE, 1,969 shares advanced while 1,269 shares declined and 164 shares were unchanged. Investors’ wealth soared by nearly Rs 3.2 lakh crore as market capitalisation of all BSE-listed shares jumped to Rs 261.74 lakh crore as against Rs 258.56 lakh crore on Wednesday.
Here are three factors that led to the rally in markets
Fed announcement
Overnight announcement by the US Fed boosted investors’ sentiment. US Fed kept its bond-buying program intact for now. The US central bank said it would likely begin tapering its monthly bond buying as early as November without giving any specific date. It also said that it could raise interest rates sooner than expected. Investors took comfort from the factor that the US central bank is not increasing rates immediately.
Positive news from China
The debt crisis at Chinese real estate giant Evergrande, which roiled equity markets globally earlier this week seems to be resolving soon. One of the units of Evergrande said that it has “resolved” a coupon payment on an onshore bond. Concerns also eased after People’s Bank of China injected $17 billion into the banking system. This boosted the global sentiment, which rubbed off on Indian markets too.
Government reforms & FPI inflow
One of the biggest factors behind the equity market rally recently is the continuous reforms being undertaken by the government. The telecom relief package announced by the government last week not only raised hopes of revival of cash-strapped telco Vodafone Idea, but it also improved outlook of the banking sector, which has nearly Rs 30,000 crores of exposure to the company. Also, the production linked incentive scheme announced for various sectors bodes well for the revival of the pandemic-hit economy and may go a long way in boosting India’s export revenue while reducing imports.
Meanwhile, the commerce and industry ministry on Wednesday said foreign direct investment (FDI) equity inflows into the country grew by 112% in the first four months (April-July) of 2021-22 ($20.42 billion) compared to the year-ago period ($9.61 billion). Experts believe China crackdown and the debt crisis at Evergrande bodes well for India as it may lead to higher FPI and FDI flows to the country.
