Mumbai: Defying demonetisation blues, Indian investors have made a killing with the markets rallying to a two-year high on 6 March. Both the benchmark indices rose around 12-13% from December 26, 2016 when the Nifty touched a seven-month low at 7908 points post demonetisation.
Besides abundant liquidity spurring the hectic market buying, analysts say that revival in commodity prices and relief rebound after better-than-expected December quarter results drove the rally. “The market had reacted negatively after demonetisation but December quarter results showed that the impact was not so bad as anticipated which spiked investors interest in buying further into equities," said Pankaj Pandey, head of research at ICICI Securities Ltd.
What could have also led to the market rally, Pandey pointed out, is that other asset classes like gold, real estate and fixed income are not giving as much returns than investment in equities.
Sectorally, BSE Consumer Durables jumped 28.39%, biggest gainer among other sectoral indices, followed by BSE Metal (up 25.23%) and BSE Realty (up 22.99%).BSE FMCG index jumped 14.54% in the period. BSE Auto rallied 11.38% in the period from December 26, 2016 to March 6, 2017.
Index heavyweights, Tata Steel and Reliance Industries increased 29.57% and 24.62% respectively on the BSE. Bharti Airtel was up 22.21%, Axis Bank increased 20.06% while HDFC Bank jumped 17.48%. ITC also grew 17.22%, Maruti Suzuki India Ltd was up 14.94% and GAIL was up 21.91% in the period.
Among stocks that are listed on the NSE, Idea Cellular jumped 58%, while Bharat Heavy Electricals rose 37.41%, YES Bank gained 32.68%, Hindalco Industries also grew 31.72% in the period. Among all the 50 Nifty stocks, only four stocks (NTPC, Tata Motors, Dr Reddy’s Laboratories Ltd and Bharti Infratel Ltd) have fallen, down 0.9-5% in the period.
Analysts, however, feel that the market momentum may be arrested due to anxiety ahead of election results on 11 March with exit polls due on 9 March. Deven Choksey, managing director, KR Choksey Shares, thinks the market has already factored in outcome of state election results. According to market consensus, ruling party BJP is likely to win majority in the assembly results, especially in Uttar Pradesh (UP). UP is the most politically significant state as it has highest number of assembly and Lok Sabha constituencies in India.
March-quarter earnings, GST implementation and the US Federal Reserve’s decision on interest rates in its meet next week are likely to be more crucial for markets.
“Though interest rate hikes by Fed are already factored in markets, the central bank comments on macro outlook will be watched out," said Pramod Gubbi, head of equities at Ambit Capital.