Market Wrap: Sensex, Nifty end higher on all-round buying; investors richer by nearly ₹3 lakh crore in a day

Market Wrap: Sensex, Nifty end higher on all-round buying; investors richer by nearly ₹3 lakh crore in a day

Market Wrap: Sensex, Nifty rise almost 3% in six days; investors' wealth swell by over ₹11 lakh crore

The Indian stock market has been on a winning streak for the past six days, defying the global market weakness and the rising Covid-19 cases in the country. The benchmark indices, Sensex and Nifty, have gained almost 3% each in this period, adding over ₹11 lakh crore to the investors' wealth.

What drove the rally?

The rally was driven by a combination of factors, such as:

- Positive domestic cues: The Indian economy has shown signs of recovery from the pandemic-induced slowdown, as reflected by the better-than-expected GDP growth of 20.1% in the first quarter of fiscal year 2022. The government has also announced several measures to boost growth, such as the ₹6.28 lakh crore stimulus package, the ₹1.1 lakh crore loan guarantee scheme for Covid-affected sectors, and the ₹20,000 crore production-linked incentive scheme for textiles.
- Strong corporate earnings: The corporate earnings season for the June quarter has been largely positive, with most companies reporting strong revenue and profit growth, aided by low base effect, cost rationalization, and demand recovery. According to a report by Motilal Oswal Financial Services, the Nifty 50 companies reported a 15% year-on-year growth in sales, a 38% growth in EBITDA (earnings before interest, taxes, depreciation, and amortization), and a 45% growth in net profit in the June quarter.
- Favourable global liquidity: The global liquidity conditions have remained supportive of the emerging markets like India, as the major central banks have maintained an accommodative monetary policy stance amid the uncertainty caused by the Covid-19 pandemic. The US Federal Reserve has indicated that it will not rush to taper its bond-buying program or hike interest rates until it sees substantial progress in inflation and employment. The European Central Bank has also reaffirmed its commitment to keep its stimulus measures in place until at least March 2022⁷.
- Sectoral rotation: The market rally has been broad-based, with different sectors taking turns to lead the momentum. While the IT and pharma sectors were the outperformers in July, driven by their resilient business models and strong earnings visibility, the infra, industrial, and capital goods sectors have gained traction in August, boosted by the government's focus on infrastructure spending and economic revival. The banking and financial sector has also witnessed some recovery, as asset quality concerns have eased and credit growth has picked up.

How did the indices perform?

The Sensex closed at 66,599.01 on Friday, September 8, 2023, up by 333 points or 0.50% from its previous close of 66,265.56. The Nifty closed at 19,819.80 on the same day, up by 93 points or 0.47% from its previous close of 19,726.80.

In the six-day period from September 1 to September 8, 2023, the Sensex gained 1,766 points or 2.73%, while the Nifty gained 566 points or 2.94%. Both indices recorded their best weekly performance since July 9, when they had gained 3.5% each.

The market capitalization of BSE-listed companies increased by ₹11.05 lakh crore in this period, from ₹144.48 lakh crore on August 31 to ₹155.53 lakh crore on September 8.

Which stocks and sectors were the winners and losers?

Among the individual stocks, Larsen & Toubro was the top gainer on both Sensex and Nifty on Friday, rising by 4.26% to close at ₹2,847.05. The stock was also the best performer on both indices in the six-day period, surging by 14.81%. The company reported a robust order inflow of ₹42,233 crore in the June quarter, up by 76% year-on-year.

Other notable gainers on both indices on Friday were IndusInd Bank (up by 2.26%), Tech Mahindra (up by 1.69%), State Bank of India (up by 1.55%), and HCL Technologies (up by 1.49%).

Among the individual losers, Coal India was the top loser on both Sensex and Nifty on Friday, falling by 7.07% to close at ₹274. The stock was also the worst performer on both indices in the six-day period, plunging by 16.67%. The company reported a lower-than-expected consolidated net profit of ₹2,077.51 crore in the June quarter, down by 52% year-on-year.

Other notable losers on both indices on Friday were Bharat Electronics (down by 1.23%), Adani Power (down by 3.22%), Tata Power (down by 2.35%), and Tata Steel (down by 0.5%).

Among the sectoral indices, Nifty Realty was the top gainer on Friday, rising by 2.12% to close at 593.10. The index also hit its 52-week high during the session. The realty sector has been benefiting from the low interest rates, stamp duty cuts, and pent-up demand for residential properties.

Other sectoral gainers on Friday were Nifty Consumer Durables (up by 1.38%), Nifty Oil and Gas (up by 1.12%), Nifty Bank (up by 0.62%), and Nifty Private Bank (up by 0.56%).

Among the sectoral losers, Nifty Media was the top loser on Friday, falling by 0.97% to close at 2,055.75. The media sector has been facing challenges due to the Covid-19 impact on advertising revenues and content production.

Other sectoral losers on Friday were Nifty Pharma (down by 0.36%) and Nifty IT (down by 0.10%).

What is the outlook for the market?

The market outlook remains positive, as the fundamentals of the Indian economy and corporate sector are improving, and the vaccination drive is gaining pace. However, some risks and challenges remain, such as:

- Covid-19 situation: The Covid-19 situation in India is still uncertain, as some states have reported a rise in cases and imposed fresh restrictions. The threat of new variants and a possible third wave also looms large. The pace and coverage of vaccination will be crucial to contain the spread of the virus and ensure a sustained economic recovery.
- Global market volatility: The global market volatility may increase in the coming weeks, as the investors will closely watch the policy actions and statements of the major central banks, especially the US Fed, which may signal its tapering plans soon. The rising oil prices, geopolitical tensions, and trade disputes may also weigh on the global market sentiment.
- Valuation concerns: The Indian market is trading at a premium valuation compared to its historical averages and peers, which may limit the upside potential and increase the downside risk. According to Bloomberg data, the Sensex is trading at a trailing price-to-earnings ratio of 31.6, while the Nifty is trading at a ratio of 29.4, as of September 8. These are higher than their five-year average ratios of 23.4 and 24.6 respectively.

Therefore, investors should adopt a cautious and selective approach while investing in the market, and focus on quality stocks with strong fundamentals and growth prospects.


(4) Sensex, Nifty growth boost investor wealth by Rs. 11L crore.

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