Sensex | Sensex hits new high, too; focus on earnings, rates
Mumbai: India’s stock indices rose to all-time highs on Monday, with the Nifty crossing the 18,000-point milestone for the first time led by automobile stocks which rallied on expectations of better sales in the upcoming festival season. Losses in the information technology shares – mainly Tata Consultancy Services, which posted weaker-than-expected September quarter results – put a lid on gains with the Nifty closing below 18,000.
Nifty ended up 50.75 points or 0.3% at 17,945.95 after touching an all-time high of 18,041.95 during the day. Sensex also logged an all-time high at 60,476.13 but ended at 60,135.78, up 76.72 points or 0.13% from the previous close.
Analysts said continued strength in earnings is crucial with markets having more than doubled from their lows in March 2020. “The narrative around the US Fed tapering and normalisation of surplus liquidity and interest rates in India is getting stronger. This would remain a key monitorable and could pose some headwinds to equity valuations, given the sharp re-rating witnessed post-March 2020,” said Motilal Oswal in a note. “Earnings delivery, against elevated expectations, becomes crucial,” the firm said.
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Oil prices extended gains with Brent crude gaining 1.7% to $83.79 – the highest since October 2018 – amid the growing energy crisis that has gripped major. Analysts said rising oil prices have kept investors on the edge but it’s the upward pressure on interest rates that’s a bigger risk for financial markets.
“The risk is not so much from crude prices but there is a growing risk from the interest rate side. Inflation may be sticky and globally given the supply side disruption across so many sectors the risk is that inflation stays high,” said Sanjeev Prasad, Co-Head of Kotak Institutional Equities. “If the markets and central banks change their current assumptions that inflation is transitory then the market expectation of rate increases will be advanced earlier.”
“The current expectation is rate increases will happen sometime at the end of next year as far as the Fed is concerned and middle of next year as far as the RBI is concerned,” Prasad added.
The market has also been drawing support from the Reserve Bank of India’s announcement last week to retain an accommodative stance. India’s largest public-sector lender SBI gained 2.5% after hitting record levels.
Auto stocks rallied further after giving a breakout on technical charts recently. Maruti Suzuki and M&M gained 3.7% and 2% respectively. Tata Motors was the biggest Nifty gainer, rising 9% to its highest level since January 2018.