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The BSE Sensex index vaulted past the 50,000 mark for the first time, capping a phenomenal run that lifted the stock markets to a record amid a deadly pandemic.

The benchmark index climbed as much as 0.7% to 50,184 in intra-day trading on Thursday, almost doubling from its March nadir. The index broke through 50,000 with a gap-up opening in the morning, and stayed above the mark for most of the day, before giving up the gains in a dramatic plunge on reports of a deadly fire at the Pune factory of India’s biggest vaccine-maker. The Sensex closed at 49,624.76.

The remarkable stocks’ rally was seeded in March as local investors started buying the panic, although few could have predicted then that the rebound would be so sharp and so soon. As central banks around the world adopted expansionary monetary policies to support their economies, foreign liquidity flowed into Indian stock markets, driving the unprecedented boom.

The surge in equity prices was also fuelled by a swifter-than-expected economic recovery, underlining India’s resilience and the importance of the markets as an engine of prosperity.

“Indian markets have been witnessing strong momentum over the past few months on hopes of a faster economic recovery after lockdown. Positive global cues, sustained foreign institutional investor inflows and strong corporate earnings kept the sentiments high. The upcoming budget could potentially lay the foundation for a long-term economic growth path," said Motilal Oswal, managing director and chief executive of Motilal Oswal Financial Services. Oswal expects the markets to continue its northward march on the back of an earnings rebound, continued inflows from foreign portfolio investors, positive developments on the vaccine front, a broad-based economic recovery and low interest rates.

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Joe Biden, who took over as the 46th president of the US on Wednesday, is expected to push through a nearly $2 trillion US fiscal stimulus plan, a move that may support stocks worldwide. From the lowest point in March, the Sensex has climbed 95.73% while the BSE Midcap index soared 99% and the BSE Smallcap index surged 113% till date. With an aggregate current market capitalization of 196.51 trillion, the stock markets have made investors wealthier by 94.64 trillion since last March. The Sensex contribution to the overall market cap is 49%, while the BSE Midcap and the BSE Smallcap contribute about 13% each.

“The Sensex crossing the important milestone is a telling sign of the economy and markets, shifting orbits on a broad-based recovery and better days ahead," said Vijay Chandok, managing director and CEO of ICICI Securities. “The combination of strong capital inflows, low interest rates and leaner balance sheets of Indian corporates, along with government measures to support growth, is expected to lift the economy. The same is likely to keep the markets buoyant."

In the past year, India’s benchmark indexes rose 17% in dollar terms, on par with gains seen in the MSCI World index. However, the MSCI Emerging Markets index, which captures large- and mid-cap representation across 27 markets, has outperformed with a 26% gain.

Analysts are optimistic that the markets will continue to surge ahead despite elevated valuations, except for bouts of volatility around the Union budget.

“The positive thing about the ongoing rally is that it has been fairly broad-based; across market caps and sectors. As the panic and crash was pandemic-induced, the pullback was led by pharma. Since then, banks, information technology, automobiles, etc., have also joined the rally," said Joseph Thomas, head of research, Emkay Wealth Management.

However, the valuations do look stretched, said Thomas, adding that earnings disappointments remain the key risk at the current juncture. “The continuous upmove, not backed by fundamentals, may make the rally fragile going ahead," he said.

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