Sensex hits new record, small-, mid-caps rise too

Foreign portfolio investors (FPIs) purchased shares worth a provisional ₹4,013.10 crore, while domestic institutions bought shares worth a provisional ₹550.36 crore. To be sure, the FPI figure was high as Piramal Enterprises Ltd sold Shriram Finance Ltd’s shares through block deals, with Morgan Stanley Asia (Singapore) PTE alone buying 2.18 million shares.

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The Sensex rose to 63,588.31, surpassing its previous high of 63,583.07 on 1 December by a little over five points, before paring some of its gains at closing. The broader Nifty index of 50 blue chips fell short of testing its previous high of 18,887.60 on 1 December by 11.7 points. However, both the indices made fresh closing highs at 63,523.15 and 18,856.85.

The market undertone remains positive as FPIs have turned buyers in the current fiscal year after selling a combined ₹1.78 trillion in FY22 and FY23. In FY24 through 20 June, they purchased shares worth ₹79,678 crore.

As FPIs sold in the previous two fiscals, both indices have remained range-bound since October 2021, testing new highs only in FY24.

For instance, the Sensex hit a high of 62,245.43 on 19 October 2021. From there, it corrected to a low of 50,921.22 on 19 June 2022. It then rose to a high of 63,583.07 on 1 December, only to fall again to 57,084.91 on 20 March. From there, it has rallied again to Wednesday’s record high.

Analysts said the rally since March has been steady and spurred by FPI buying, which is a good sign, as these are considered the strong hands of the market, with retail investors constituting the weak hands.

“The fact that FPIs have been buying even at these levels indicates that the market undertone remains positive,” said Siddhartha Khemka, research head of retail at Motilal Oswal Financial Services. “We expect the Nifty will also test its record high shortly and are bullish on financials, infrastructure, and capital goods stocks.”

What adds to the strength of the current rally is the participation by broader market stocks from mid-cap and small-cap spaces, which also hit fresh highs on Wednesday. For instance, the BSE MidCap Index hit a fresh high of 28,635.61, and the BSE SmallCap Index touched a record high of 32,577.35.

“The current rally in Indian markets, which saw the key benchmark index hit all-time highs, is supported by participation from small-cap and mid-cap stocks, which has helped the market cap of BSE-listed companies reach record highs in June ( ₹294.36 trillion) this year,” said Puneet Maheshwari, director, Upstox.

“Investor confidence has significantly increased thanks to India’s remarkable economic growth, which is just beginning to unfold. We believe that the opportunities that the expanding Indian economy has to offer should eventually be reflected in the markets,” Maheshwari added.

Rajesh Palviya, technical head at Axis Securities, expects the Nifty to trend between 18,600 and 19,200, aided by FPI buying.

What adds to the attractiveness of the current rally is the reasonable valuations, Khemka said. For instance, the one-year forward price-to-earnings multiple of the Nifty stands at 19 times currently, against 23 times in October 2021, when it made a high of 18,604.45. With Nifty earnings expected to grow 15% in FY24, the valuations indicate that markets are priced reasonably.

Updated: 22 Jun 2023, 12:27 AM IST