Indian indices touched a fresh high in trade on Thursday driven mostly by IT stocks and financials. The indexes rallied as the second wave of the COVID-19 pandemic receded, increasing investor confidence in the economy's recovery, and in-line earnings season.
The Sensex rose as much as 349 points to hit a record high of 53,253.20 while the Nifty added 93 points to its new high of 15,946.65.
"IT results of majors like TCS & Infosys indicate a strong order pipeline emboldening the companies to raise their revenue guidance to 14-17%. This augurs well for the industry and can invite further investments. So, this leg of the market remains strong. However, Nifty is likely to face resistance around 15,900 since FIIs are consistent sellers at higher levels," stated VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Meanwhile, in 2021 YTD, the Sensex and Nifty rose 11 percent and 14 percent, respectively
On a YTD basis, over 30 stocks in the BSE 500 index have doubled investor wealth this year. Telecom company HFCL has risen the most, up over 200 percent followed by Adani Enterprises, JSW Energy, Deepak Fertiliser, Gujarat Fluorochemicals, and Redington India up over 150 percent each.
Meanwhile, eClerx Services, Aklyl Amines, Tata Elxsi, HEG, Indian Overseas Bank, DCM Shriram, Adani Total Gas, IIFL Finance, and Hindustan Copper added over 130 percent each.
June quarter earnings season has also begun and analysts believe that this will provide some direction to the market hereon. Since restrictions during the second wave were localised and less stringent as compared to last year, most experts expect the impact in the quarter under review to be contained.
Further, as the economy reopens and vaccinations gain momentum, demand recovery could strengthen.
However, markets experts feel that the current valuations of the Indian markets are rich and no longer lucrative on the risk-reward metric but any dip in the markets should be used to buy quality stocks, they advise.
Meanwhile, the risks which could stop this record run include a possible third COVID wave, persistent inflation readings prompting a potential rate increase, and volatility around the US Fed taper talk.
Vijayakumar added that global support to the markets comes from the Fed chief Jerome Powell's remark that rates will remain near zero until "inflation goes persistently and materially higher".
This has further emboldened the equity bulls. Even though the broader market party continues, investors should exercise caution while buying into mid-small caps. Correction in the broader market, when it comes, can be sharp, he advises.
First Published: Jul 15, 2021 2:35 PM IST
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