As global markets struggle, desi factors drive India’s stocks

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MUMBAI: In the Chinese year of rabbits, bulls in India are having a great run on Dalal Street. Buoyed by healthy growth projections, a strong mandate in the recent assembly elections and improving inflation outlook, the sensex on Monday scaled mount 70K, having added nearly 3,000 points in the last seven sessions.
On Monday, the sensex crossed the long-anticipated milestone in early trades and showed a steady trend till the close.It recorded a new all-time high at 70,058 points and closed at 69,929 points, up 103 points. On the NSE, thenifty for the second consecutive session crossed the 21K mark but again closed below that mark, at 20,997 points, up 28 points.
The sensex took 549 sessions in its journey from 60,000 to 70,000. The fastest such 10K milestone was achieved in 166 days, when the sensex had raced away to the 60K milestone from the 50K mark.
This time, a host of domestic factors acted as tailwinds for the Indian market during the past two years. By contrast, most other markets around the world struggled with multi-year high inflation that followed an unprecedented streak of interest rate hikes by central banks, war clouds in Europe and West Asia, a bank failure in the US and volatile crude oil prices.

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In India, strong fundamentals like robust growth in tax collections, a relatively stable currency, forex reserves that’s near record high and a not-so-high interest rate boosted investor sentiment.
Strong results, sectoral rotations aid rally: Experts
Strong corporate earnings growth with timely sectoral rotations also aided the rally. All these factors took the sensex and the nifty to record high levels, market players said.
In Monday’s market, as was seen in most of the recent sessions, on Monday too foreign portfolio investors (FPIs) were net buyers at Rs 1,261 crore. So far in the month, this influential group of investors have net pumped in over Rs 32,000 crore through stocks.
Although FPIs usually capture the limelight by their sheer volume of trades in the Indian stock market, data shows that it’s the domestic mutual funds that have emerged to be the real counterbalance when foreign funds sell aggressively.
Consider this: Between October 2021 (soon after sensex crossed 60K mark) and Monday, foreign funds are still net sellers at about Rs 24,500 crore. In contrast, the domestic mutual funds have net pumped in nearly Rs 4 lakh crore into the stock market. The result: The sensex has gained about 16% during this period, investors’ wealth has gone up by about Rs 95 lakh crore and the Indian market is now the fifth largest in the world in terms of market cap.
While some FPIs do see inflows when the indices go up and sell when indices fall (per the investment mandates of momentum and select hedge funds), MFs have one steady source of inflows, namely systematic investment plans.
Monday’s record high index levels after consecutive sessions of gains may kick in profit taking by some investors, resulting in a brief market correction. According to Vinod Nair, Head of Research, Geojit Financial Services, as the sensex crossed the 70,000 level on Monday, signs of profit booking were evident at higher levels “as traders anticipated clues from (Tuesday’s) significant data releases on inflation from the US and India, as well as the IIP.” While the US inflation reading is predicted to remain stable, the market anticipates a rise in domestic inflation. “The better-than-expected US job data and a moderate increase in US bond yields from the recent lows, however, also encouraged investors to book profits at higher levels,” Nair wrote in a note to investors.
Looking ahead, in the next few days markets are likely to consolidate in a range given global central banks are set to announce policy outcomes this week, said Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services. Further, the US and the India inflation numbers, along with India’s manufacturing data set for Tuesday’s release, would keep investors cautious, Khemka said.



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