Indian markets hit their record high levels for the third straight session on Monday following gains in global peers on strong growth in US economy. Sensex also crossed the psychological level of 65,000 in morning deals.
Back home, while most of the sectors were in the green, banks, financials and metal drove the rally. A rise in index heavyweights Reliance Industries, HDFC twins, and ICICI Bank also added to the gains.
Meanwhile, broader markets were mixed with the Nifty Midcap up 0.4 percent and Nifty Smallcap surging over 1 percent.
"The ongoing rally in global stock markets is primarily driven by the surprising and unexpected strength of the US economy (2 percent GDP growth in Q1FY23), in spite of the savage 500bp rate hike by the Fed. Global markets which had discounted a US recession by mid 2023 have been proved wrong and the markets are now compensating for the excessive pessimistic discounting in 2022," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He also pointed out that an important point of distinction between the rally in US and in India is that the US rally is primarily being led by 8 tech stocks while the Indian rally is more broad based. Sustained FPI flows ( ₹47,148 crores in June) is the main driver of the rally in India.
Foreign portfolio investors (FPIs) extended their buying spree in Indian shares in June and bought Indian equities worth ₹47,148 crore for June 2023, the highest level since August 2022. FPIs had pumped in ₹51,204 crore in August last year. Meanwhile, they invested ₹43,838 crore in May 2023 and have bought shares worth ₹76,406 crore in 2023 YTD.
Vijayakumar noted that the recent surge in FPI inflows has been triggered by the recent ‘Sell China, Buy India’ strategy of the FPIs which, in turn, is being influenced hugely by the anti-China attitude/policy evolving in the US and the developed world.
Since the strength of the market momentum is high, the rally can continue; but valuations are getting stretched, added the expert.
On BSE, HDFC, HDFC Bank, Ultratech Cement, M&M and SBI were the top gainers, up between 1.2-2.5 percent whereas Powergrid, Maruti Suzuki, Tech Mahindra, Sun Pharma and HUL lost the most, down between 0.5-1 percent each.
Meanwhile, on NSE, JSW Steel HDFC twins, Eicher Motors, and Grasim rose the most while PowerGrid, Tech Mahindra, Maruti, Bajaj Auto and UPL fell.
Nifty PSU Bank was the top sectoral performer, up over 1.36 percent followed by Nifty Metal, up 1.2 percent. Meanwhile, Nifty Bank and Nifty Fin Services were also up over 1 percent each. Nifty Auto and Nifty Realty also added 0.4 percent each. However, Nifty FMCG, Nifty IT and Nifty Pharma were flat but in the red.