Indian equity benchmarks commenced the trading week on a positive note, scaling fresh lifetime highs as strong domestic economic fundamentals provided a solid foundation. The momentum, sustained for the third consecutive week, was fueled by better-than-expected GDP figures and an improved global risk environment.
Markets Open in Green, Scaling New Peaks
On Monday, the BSE Sensex opened near the significant 86,000 mark, while the Nifty50 started trading above 26,250. By 9:16 AM, the indices had firmed up their gains. The Nifty50 was trading at 26,284.65, marking an increase of 82 points or 0.31%. Simultaneously, the BSE Sensex stood at 85,984.27, up by 278 points or 0.32%.
The Paradox of a Narrow Market Rally
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted a unique characteristic of the current market upswing. He noted, “New record at the index level but no celebration in the market”. He explained that for a majority of retail investors, portfolio values remain below their September 2024 peaks.
The reason behind this paradox is the concentrated nature of the rally. Eight key stocks – HDFC Bank, Reliance Industries (RIL), ICICI Bank, Bharti Airtel, L&T, ITC, Infosys, and State Bank of India (SBI) – command approximately 50% of the weight in the Nifty50 index. Therefore, when five or six of these heavyweights advance, the index climbs, even if broader participation is lacking. Dr. Vijayakumar pointed out that 330 stocks within the NSE 500 universe are still trading below their September 2024 highs, and many retail portfolios are heavy on these underperforming segments.
GDP Data: A Mixed Bag for Market Sentiment
The stellar Q2 GDP growth number of 8.2%, particularly the impressive expansion in manufacturing, services, and final consumption expenditure, has the potential to propel the market further. However, analysts see a couple of dampeners. The modest nominal GDP growth of 8.7%, due to a low GDP deflator, is viewed as disappointing from a market perspective.
Furthermore, the robust economic health reduces the immediate need for monetary stimulus. Consequently, market expectations for a rate cut from the Reserve Bank of India's Monetary Policy Committee (MPC) this Friday have moderated, as the economy appears to be “firing on all cylinders.”
Global Cues and Institutional Activity
Globally, US stocks posted gains in a low-volume, abbreviated post-Thanksgiving session on Friday, supported by strong retail performance and a recovery in technology shares. Asian markets, however, showed mixed trends on Monday as investors awaited key economic data ahead of an anticipated Federal Reserve rate cut later this month.
In the commodities market, crude oil prices rose over 1.5% after the OPEC+ group confirmed on Sunday that it would maintain current production levels through the first quarter of the next year.
On the institutional front, Foreign Portfolio Investors (FPIs) were net sellers to the tune of Rs 3,795 crore on Friday. In contrast, Domestic Institutional Investors (DIIs) provided support with net purchases of Rs 4,148 crore, highlighting the ongoing tug-of-war between foreign and domestic capital flows.
Disclaimer: The views and recommendations expressed by investment experts are their own and do not represent the views of this publication. Readers are advised to consult certified experts before making any investment decisions.
