As the Indian equity indices logged new highs with the BSE Sensex hitting the 50,000 mark for the first time ever, the road to this landmark has been bumpy at times in the past one year, as it had plunged to around 25,000 points in March 2020.
On March 24, 2020 Sensex touched a decadal low of 25,638.9 points after the announcement of the nationwide lockdown to tackle Covid. Interestingly, it took the index just 10 months to reach the landmark 50,000 mark. This indicates a nearly 100 per cent return during the 10 month-period.
The markets got a major push after the announcement of the liquidity measures by the government under the 'Atmanirbhar Bharat' package and the steps of the Reserve Bank of India (RBI) including the lowering of rates.
Another major factor pushing the markets higher was the massive inflow of foreign institutional investments (FII) which flocked towards India amid zero or nil interest rates in major economies including the US and European countries.
India received FIIs of around $22.5 billion or Rs 1.7 lakh crore in equities in 2020. Net FII inflow so far this month stands at Rs 20,098.53 crore. The Net inflow of foreign portfolio investment (FPI) so far in the current financial year stood at over Rs 2.38 lakh crore, according to NSDL data. This is the highest FPI inflow ever in a fiscal.
Contrary to the enthusiastic participation of foreign investors, the domestic institutional investors (DII) have been wary of the Indian stock market and continuously pulled out investments amid the pandemic. In FY21, DIIs recorded their first net outflow in fiver year. Net DII outflow in this fiscal stands at over $4.9 billion so far.
9% rise in one month
Again, it took the Sensex just a month to reach 50,000 from 45,500 levels. It rose nearly 9 per cent in just a month's time from 45,553.96 on December 21 to 50,000 on Thursday, January 21.
Going ahead, the analysts believe that there might be correction in the indices, but the underlying sentiments would be bullish.
40,000 to 50,000 in 100 days
Shrikant Chouhan, Executive Vice President and Technical Research Analyst with Kotak Securities noted that the rally from 40,000 to 50,000 has been phenomenal, post sharp correction in August 2020 when the Sensex hit 40,000, the index has gained 10,000 points in 100 days.
"The ideal strategy should be to buy on dips buy between 49,600 and 49,500 and keep a final stop loss at 49,200 for the same. On the other side, the market can scale higher with the uptrend wave likely to continue up to 50,800-51,750," he said.
“Sensex at 50K is a psychological feel good factor and has no significance on the decision to invest or exit from equity markets. The relevant yardsticks to look at for investing include the current valuations and future earnings trajectory of underlying companies. The longer term view remains positive given the strong tailwinds in a host of industries including IT, pharma and manufacturing. However, the current valuations do warrant some caution with likelihood of increased volatility in the short term," Gaurav Awasthi, senior partner – IIFL Wealth Management, said.
In line with Sensex, the Nifty50 on the National Stock Exchange also has of late touched new highs and is well on its course to touch 15,000.
A recent report by ICICI Securities said that Nifty50 has witnessed its fastest rally since the financial year 2009-10 as it gained 86 per cent in the current financial year. On Thursday, Nifty50 recorded an all-time high of 14,745.20 points and the Sensex logged a high of 50,149.49.
With IANS Inputs