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Business News/ Market / Stock-market-news/  Nifty breaches 8,000 mark on GDP data
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Nifty breaches 8,000 mark on GDP data

While correction bouts are not being ruled out, some brokerages see the run-up as first leg of a structural bull run

Sensex rose for the seventh straight session and closed 0.86% or 229.44 points higher at 26,867.55 points, while Nifty closed 0.92%, or 73.35 points, higher at 8,027.70 points. Photo: Hemant Mishra/MintPremium
Sensex rose for the seventh straight session and closed 0.86% or 229.44 points higher at 26,867.55 points, while Nifty closed 0.92%, or 73.35 points, higher at 8,027.70 points. Photo: Hemant Mishra/Mint

Mumbai: India’s benchmark equity indices recorded a new high on Monday, with the Nifty index breaching the psychologically important 8,000 mark. Investors cheered better-than-expected economic growth in the June quarter, which raised hopes the economy was back on track after two years of sluggish growth.

Data released on Friday showed Asia’s third-largest economy growing at 5.7% in the first quarter of current fiscal year driven by strong industrial recovery, the fastest pace in 10 quarters. This, along with improving monthly automobile sales, were the first concrete signs that the economic growth engine was back on its growth trajectory.

While bouts of correction are not being ruled out, a number of brokerages are seeing the run-up in the market as the first leg of a structural bull run. The most bullish targets are from Ambit Capital Pvt. Ltd—which expects BSE’s Sensex to reach 30,000 points for the fiscal year end. A CNBC-TV18 report cited Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services Ltd, saying he expects Nifty to breach 10,000 points before the next Union budget is presented in the first quarter of 2015.

Earlier in the day, the 30-share bellwether S&P BSE Sensex touched an all-time high of 26,900.30, while the National Stock Exchange’s broader 50-share Nifty hit a high of 8,035 points.

Sensex rose for the seventh straight session and closed 0.86%, or 229.44 points, higher at 26,867.55 points, while Nifty closed 0.92%, or 73.35 points, higher at 8,027.70 points.

“The most recent trigger was the GDP data which really boosted sentiment," said Gautam Trivedi, managing director and head of equities (India) at Religare Capital Markets Ltd. Trivedi said that retail investors are now actively participating—directly as well through mutual funds, which bodes well for the markets.

The benchmark Sensex is now up 26.9% since the begining of this year, with foreign institutional investors (FIIs) pumping in a net of nearly $13 billion in Indian equities. Domestic institutional investors (DIIs) remain net sellers to the tune of 31,961.31 crore so far in 2014, but have recently turned net buyers. DIIs infused 1,845.44 crore in Indian equities in August, as mutual funds received huge inflows in their schemes.

“The markets are in the midst of a strong rally. One would expect the present momentum to continue going forward," said Ritesh Jain, chief investment officer at Tata Asset Management Ltd.

Six of the 30 Sensex stocks touched record highs—Maruti Suzuki India Ltd, Cipla Ltd, Dr. Reddy’s Laboratories Ltd, ICICI Bank Ltd, Hindustan Unilever Ltd (HUL) and Mahindra and Mahindra Ltd.

A number of fund managers, however, cautioned that short-term corrections are possible.

“We think the markets would be range-bound in the near term and may correct around 5% over the next two months as the pace of reforms is slower than the market had initially built in," Bank of America Merrill Lynch analysts Jyotivardhan Jaipuria and Anand Kumar said in a note on Monday.

While some investors have questioned the relatively expensive valuations of the Indian markets, others say a pick-up in the economy will mean a pick-up in earnings.

The Sensex currently trades at 17.14 times one-year estimated earnings, above its five-year average of 15.87 times, Bloomberg data show.

Indian equities have outperformed most Asian peers year to date. Ranking next after India in the region is Indonesia’s Jakarta Composite Index which gained 2.1.1%, followed by Thailand’s SE Thai Index which advanced 20.5% in the period. China’s Shanghai Composite Index has gained a mere 5.7% so far in 2014.

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Published: 01 Sep 2014, 10:00 AM IST
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