Sensex, Nifty scale fresh all-time highs; investors' wealth rises ₹9 lakh crore in 8 sessions

The Indian stock market continued its marathon rally for the eighth straight session on Thursday, with the benchmark indices, Sensex and Nifty, hitting their respective fresh all-time highs on strong global cues and continuous foreign fund inflows. The 30-share Sensex touched a new record high of 63,583 points in intraday trading, while the broader Nifty50 scaled a new high of 18,887 as investors cheered the U.S. Federal Reserve chairman’s comment that the central bank could slow its pace of interest rate hikes "as soon as December".

As the benchmark Sensex gained 2,438 points in the last eight trading days, investors got richer by a whooping ₹9 lakh crore as the total market capitalisation of all BSE-listed stocks rose to ₹290 lakh crore from ₹281 lakh crore at the end of trade on November 21.

The BSE Sensex touched the 60,000 mark for the first time on September 23, 2021, while it reached the 61,000 level on October 14, 2021. The benchmark index took just three trading days to hit the 62,000 mark on October 19, 2021. However, the equity market lost some momentum in the next six months amid sustained selling by foreign investors following a continued rate hike by the central banks globally to combat rising inflation. Besides, the geo-political tensions after Russia’s invasion of Ukraine, global economic slowdown, as well as Covid-lockdown in China also rattled the domestic equity market, in sync with global peers.  

In the calendar year 2022, the Sensex has rallied nearly 7%, from 59,200 to a record high of 63,583 intraday today. The rally intensified by the end of July, propelling the 30-share barometer up 14% in the past six months. In the last one month, the benchmark index has gained 3.5%.

On Thursday, the BSE Sensex opened higher at 63,356, against the previous closing level of 63,100. During the session, the index rose as much as 483 points, or 0.76%, to hit an intraday high of 63,583, led by strong gains across the metal and IT space.

Here are the key factors behind today's rally:

Global cues

The domestic market sentiment got a boost after Asian shares surged on Thursday, tracking an overnight rally on Wall Street after Federal Reserve Chair Jerome Powell signalled a slowdown in the pace of monetary tightening. MSCI's broadest index of Asia-Pacific shares outside Japan rose 2% in early trade, while shares in Hong Kong, China, and Japan gained up to 2.5% in intraday. In the overnight trade, the Dow Jones Industrial Average rose 2.18%, the S&P 500 surged 3.09%, and the tech-heavy Nasdaq Composite rallied 4.41%.

Sustained FPIs inflow

The continued fund inflows by foreign portfolio investors also lifted market sentiments. FPIs purchased a total of ₹35,000 crore worth of equities in November, the second biggest monthly inflow in 2022 so far. Among sectors, information technology, automobile, and construction sectors witnessed a surge in buying activities.

Meanwhile, domestic institutional investors (DIIs) emerged as net sellers in equity markets as they sold stocks worth around ₹6,300 crore in November. The sell-off by DIIs was attributed to higher valuation and profit booking.

Crude oil prices

There is speculation in the market that the rates of petrol and diesel in the country may drop by up to ₹14 per litre in the backdrop of the sharp decline in international crude prices. On Thursday, Brent crude was trading around $87.5 per barrel, while WTI crude was quoting around $81 a barrel.

Indian oil marketing companies (OMCs) have kept the prices of petrol and diesel unchanged for a record eighth month in a row despite ease in prices in the global market. Prices were last cut on May 22 when the government slashed excise duty on fuel prices to provide some respite to consumers from a spike in retail rates following a surge in international oil prices amid the Russia-Ukraine crisis.

Decline in volatility index (VIX)

The domestic volatility index, India VIX, continued to trade below its multi-month low of 15, indicating low risk perception amongst market participants. Today, the index declined as much as 6% to hit a low of 12.98 during the session, implying growing investors’ confidence in riskier assets.

Going ahead, the market is expected to see buying momentum as ease in commodity prices, especially crude oil, would lead to lower inflation print which may prompt central banks to slow the pace of rate increases next year. 

Global rating agency Goldman Sachs Group in a recent report said that Nifty is expected to reach 20,500 – a 9% price upside from the current levels – by the end of 2023 led by mid-teen corporate earnings growth. The brokerage, however, adds that India’s stock market remains the most expensive in Asia and when compared to other emerging markets currently. “While India’s macro/GDP growth and earnings outlook is better than the rest of the region in aggregate, we think the current market valuations are already pricing in India’s superior earnings growth over the next couple of years,” writes Sunil Koul, Asia Pacific Strategist, Goldman Sachs.