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Business News/ Markets / Markets climb fresh highs on strong GDP growth
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Markets climb fresh highs on strong GDP growth

The momentum is expected to continue led by private banks and other large cap stocks

BSE's Sensex index vaulted to 73,819.21 points on Friday, and the Nifty to a record high of 22,353.30. (Mint) Premium
BSE's Sensex index vaulted to 73,819.21 points on Friday, and the Nifty to a record high of 22,353.30. (Mint)

MUMBAI : Benchmark indices vaulted to record highs on Friday after India’s economy surprised the markets with a faster-than-anticipated pace in the December quarter, a momentum expected to continue led by large cap stocks.

Banks, capital goods, and oil and gas stocks catapulted the Nifty index to a record high of 22,353.30 points, and the Sensex to 73,819.21 on Friday. This was driven by provisional domestic institutional investors buying of 3,814.53 crore and proprietary trader purchases of 618.58 crore, BSE data show.

Foreign portfolio investors purchased shares worth a net 128.94 crore.

Investor wealth, in effect, increased by 4.37 trillion.

“The impressive GDP numbers provide the ammunition to the bulls to catapult Indian indices to all-time highs," said Devarsh Vakil, deputy head, retail research, at HDFC Securities, underscoring the bullishness on the Street. “The next upside targets to be watched are around 22,500-22,600 levels. Immediate support is at 22,200 levels."

India’s GDP expanded at 8.4% in the December quarter, much ahead of the 6.6% median growth projected in a Mint poll of 17 economists, and almost twice as fast as the 4.3% pace recorded in the third quarter of FY23. For FY24, the statistics ministry on Thursday said it expected India’s economy to grow at 7.6%, ahead of RBI’s 7% projection.

The Nifty ended Friday’s trading 1.6% higher at 22,338.75 points, its highest percentage rise in six months. The Sensex climbed 1.72%, the most in over a month, to 73,745.35 points.

The top five stocks that contributed almost three-fifths of the Nifty’s 355.95-point rally were ICICI Bank Ltd, Reliance Industries Ltd, HDFC Bank Ltd, Larsen & Toubro Ltd, and State Bank of India.

Stocks that surged to fresh life-highs included Reliance Industries ( 3,000 per share), ICICI Bank ( 1,089.95), Tata Motors ( 980.4), and Adani Ports ( 1,349).

The broad-based nature of Friday’s rally was reflected by the Nifty Midcap 150 and the Nifty Smallcap 250 indices rising 0.8% and 0.64%.

The biggest sectoral gainers were the Nifty Metal index, which rallied 3.62%, and the Bank Nifty, which gained 2.53%.

While metals gained because of the growth in the manufacturing sector, banks rose on hopes of an earlier-than-expected cut in interest rates by the Reserve Bank of India to address the tepid growth in private consumption.

A cut in rates would mean banks wouldn’t have to raise deposit rates in a hurry, which could consequently improve their net interest margins–a measure of profitability for lenders.

“The momentum in the market could continue, led by large private banks which have been lagging since the past few months," said Andrew Holland, chief executive officer, Avendus Capital Public Markets Alternate Strategies.

Holland said India’s robust GDP growth was attributable to impressive tax growth and a fewer subsidies. But weak growth in private consumption expenditure, at just 3.5% in the third quarter, warranted a rate cut by RBI before the US Federal Reserve cuts its interest rates.

“Markets would keep a close watch on the 10-year government bond yield declining below 7%, which would be a precursor to an earlier-than-expected rate cut by RBI," Holland said.

“The markets will start discounting this and the biggest beneficiaries would be the large private banks, which have missed the rally so far. FPIs could resume purchases of some of the large names, which, in turn, could sustain the momentum in the Nifty and Sensex, where financials enjoy the highest weightage," he added.

Financial services stocks have a 32.48% weight on the Nifty, followed by IT stocks (14.46%), and oil and gas companies (12.99%).

Madhusudan Muralidhar Kela, managing director, MK Ventures, said large caps, which have relatively underperformed the small and midcaps, could fuel the stock market’s rally further, and given the momentum any dips would be buying opportunities.

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Published: 01 Mar 2024, 07:55 PM IST
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