The Nifty 50 and Sensex surged 1.7 percent to hit fresh all-time highs on May 23rd. This surge is boosted by India Inc.’s in-line Q4 earnings, RBI’s record dividend payout and increasing election certainty.
Nifty 50 hit a record high of 22,993.6 intraday, while Sensex hit a record high of 75,499.91.
Factors contributing to Nifty’s boost
RBI’s record dividend payout: The Reserve Bank of India (RBI) announced a dividend worth ₹2.11 lakh crore to help the government maintain its fiscal deficit. “This is giving confidence to the market on the fiscal deficit front because this is a surplus of Rs 1 lakh crore from the RBI. This a surprise for the market as the market was projecting a Rs 1 lakh crore dividend,” said Rajesh Palviya, Head of Technical & Derivatives Research at Axis Securities.
Palviya said that this surplus amount may lead to further spending on infrastructure. “We have seen momentum in infra, railway, capital goods, and other stock which are directly linked with the spending of government.”
“This development is a significant macroeconomic positive for the market, with direct implications for the fiscal deficit and bond yields,” said Santosh Meena, Head of Research at Swastika Investmart.
Elections result: regarding the ongoing Lok Sabha polls, investors are confident that BJP will get a clean victory.
“There was nervousness about election results but considering how the polling phases have panned out in the last five phases, it is in line with the 2019 elections. So, there is no dullness in the voting percentage. That gives confidence to the street about the incumbent government coming back to power,” said Palviya.
“The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued largecaps,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
India Inc. earnings: India Inc.’s financial earnings release was a great shocker for the market. The company came with no negative earnings boosting the market, said the analyst.
Participation from midcaps and small-caps: Midcaps and smallcaps have also recorded several highs recently.
“This indicates that the broad market participation is quite strong,” said Ruchit Jain, Lead Research Analyst at 5paisa. But some pockets have become a bit overbought, he added.
The BSE midcap grew by 0.6 percent and the BSE small-cap grew by 0.3 percent.
FII expectations: “FIIs have formed decent short positions in the May series and despite this market rally, those short positions are still intact,” said Ruchit Jain. “About 69 per cent of their positions are still on the short side. If the market continues to show strength, then those shorts could come to cover and that would keep propelling further up move in the market.”
“We have consistent inflows in the mutual funds through SIP mode, which is absorbing all the FII selling seen in the last couple of months,” Jain said.
Adani Enterprises and HDFC bank stocks contributed the most to the Nifty 50 boost. The stocks gained 8 percent and 2 percent respectively.
On the other hand, Sun Pharmaceutical and Power Grid were the major laggards falling 3 percent and 2 percent on the back of weak Q4 earnings.
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