Investor optimism over strong earnings and selective buying in index blue chips pushed the benchmark Sensex above the 37,000-mark for the first time ever on Thursday, which was also the fifth straight session of gain for the benchmark.
The 30-share Sensex opened strong and breached the 37,000-mark during the early morning session before partly shedding some of the gains on account of profit booking. Later in the day, it touched a high of 37,061.62 before closing the day at a new high of 36,984.64, up 126.41 points over Wednesday’s close.
While the index has gained 633 points in the last five consecutive session, it took only 13 sessions to move from 36,000 to 37,000.
Meanwhile, the broader Nifty settled at 11,167.30, up 35.30 points or 0.32%.
Dhiraj Relli, MD and CEO, HDFC Securities, attributed the rally to strong earnings and liquidity push, especially by mutual funds that have also done considerable portfolio reallocation in the recent past.
Inflows into MFs
“New highs have come about on the back of sustained inflows into mutual funds. Earnings are also catching up. Nifty earnings, which grew at a CAGR of 3% between 2013 and 2017, increased by 8.5% in the financial year 2017-18, and this year they are likely to be in high teens. This should make the valuations look comfortable,” said Mr. Relli.
Incidentally, the mutual fund reallocation has also led to the recent trend wherein the benchmarks have scaled new highs even as the overall market breadth remained weak or even negative on most days.
On Thursday, advances at 1,335 only barely managed to outnumber the declines at 1,238 with most of the broader indices registering only marginal gains.
Most market participants still believe that the sell off in the midcap and smallcap space is not over yet.
Further, July has seen domestic institutional investors putting in more than ₹4,000 crore in equities wherein overseas investors have been net sellers at ₹927 crore.
Meanwhile, the Sensex pack saw a total of 18 stocks gaining ground on Thursday with State Bank of India, ICICI Bank, Power Grid Corporation, ONGC, Axis Bank, NTPC and HDFC all gaining in the range of 1-5% each.
While the Sensex has gained around 8.60% in the current calendar year, the BSE Smallcap index is down over 15% in 2018.
Maruti Suzuki was the worst performer in the Sensex pack, shedding 3.70% after the company June quarter profit missed analyst estimates.
