Another day, another high on D-St with bulls in mood for poll dancing

Mumbai: India's equity indices hit fresh all-time highs with the Sensex crossing the 69,000 mark for the first time on Tuesday as the market continued to ride the bullish momentum driven by pick up in foreign fund flows and Bharatiya Janata Party's wins in the recent state elections.

The Nifty gained 168.30 points or 0.81% to close at 20,855.10. The Sensex rose 431 points or 0.63% to end at 69,296.14. Both indices had surged over 2% on Monday in response to BJP's victory in three out of the four key state elections, which is seen as a harbinger of the party's performance in the crucial general elections in 2024.

Adani Group shares jumped between 6% and 20% on Tuesday after the US International Development Finance Corp (DFC) dismissed the allegations of short-seller Hindenburg Research as "not relevant". Bank stocks were among the other notable gainers with the Bank Nifty index gaining 1.25%.

Analysts said technical indicators are pointing to more upside in the Nifty 50.

"There is a breakout from the rounding bottom pattern in the Nifty after consolidating from October 2021 to June 2023," said Dharan Shah, founder of Tradonomy, an investment advisory. "The pre-election rally coinciding with this pattern is supporting the rally."

According to IIFL Alternative Research's study of market performances before and after general elections since 1980, the Sensex has returned an average of 16% in the six months before the elections. In the three months before the elections, the index has returned 8% on average.

The Sensex and Nifty have run up close to 11% in a near one-sided rally since October 26, raising concerns that the current market levels are overbought.

"Despite a strong rally of almost 2,000 points in the markets, the valuations are still comfortable," said Sneha Podar, associate vice president-equity research at Motilal Oswal Financial Services. "However, the mid-cap and small-cap segments seem overbought and thus a shift towards large-cap stocks seems imminent."

NSE's Midcap 150 index gained 0.4% and the Smallcap 250 moved up nearly 0.2% on Tuesday. Out of the 3,875 stocks traded on the BSE, 2031 declined, while 1,731 advanced.

"Structurally, we are neither overbought nor underbought," said Shah. "Minor corrections can be expected though."

Elsewhere in Asia, China dropped 1.7%, Hong Kong declined 1.9%, South Korea ended 0.82% lower, Taiwan ended 0.54% down and Indonesia ended flat over the previous trading session. The pan-Europe index Stoxx 600 was trading 0.1% at the time of going to print.

FPIs net bought shares worth ₹5,223.51 crore on Tuesday, while their domestic counterparts were sellers to the tune of ₹1,399 crore. The buying on Tuesday took the foreign fund flow tally into India so far in December to more than ₹26,000 crore. "There is short covering by FIIs who had short positions of 88% on derivative markets," said Shah. "Post the current short squeeze, they are likely to take fresh positions in Indian equities."