Market bulls make Nifty gains to reach Olympian heights

Mumbai: Indian stocks soared to new highs on Tuesday with the Nifty crossing 16,000 for the first time ever, as retail investors’ undiminished appetite for equities helped shrug off concerns over recent foreign fund outflows. Fund managers and strategists said indicators are pointing to more market strength in the near term as subsiding Covid-19 infections in most states and the easing of restrictions have boosted risk sentiment.

The BSE Sensex rose 872.73 points or 1.65% to close at 53,823.36. The NSE Nifty jumped 245.60 points or 1.55% to end at 16,130.75. The spike helped the Nifty break past the elusive hurdle of 16,000, forcing traders to square off derivative positions that bet on limited upsides for the index.

Fund managers said the recent leg of the market upmove has been fueled by retail money, which has helped Indian equities survive the emerging market selloff in recent weeks.


“FPI (foreign portfolio investor) selling is an emerging market issue and is more on account of the events in China than anything related to India,” said S Naren, ED and CIO, ICICI Prudential Mutual Fund. "The good part for India is retail investors are absorbing all the selling and driving the markets too."

To be sure, foreigners turned net buyers on Tuesday to the tune of Rs 2,116.60 crore, snapping their recent selling spree. These investors have sold shares worth Rs 4,046 crore so far in August (until Monday) after pulling out Rs 11,308 crore in July.

Beijing’s crackdown on some of its biggest companies in technology and education has soured sentiment in Asian emerging markets with global investors pulling money out of this basket of equities. China has the highest weightage in emerging markets—one of the most popular investment destinations since November 2020, when global drugmakers announced that vaccines against Covid were ready for use. Armed with ample liquidity provided by central banks in developed economies, investors lapped up beaten-down, emerging market stocks.

The Chinese government’s recent spate of clampdowns on its private technology giants has upset the apple cart. Since July 1, the MSCI Emerging Market index is down 5.5% while the MSCI China index has slumped 12.5%. MSCI India is up 2%, thanks to the flood of money from retail investors.

Most of the flows from the country’s growing breed of individual investors has gone into mid- and small-cap stocks, which are witnessing the best price spurts since 2017. So far in 2021, the Nifty Smallcap 250 index has gained almost 50% and the Nifty midcap 150 index has risen 34%. The Nifty advanced 15% in this period.

Analysts said the valuations of bluechips, which comprise the Sensex and Nifty, are softer compared with smaller stocks because of the underperformance.

"Large-cap valuations are quite reasonable and indices are gaining because certain large-cap stocks in the financials sector, which have been laggards in the last six to 12 months, have started rallying," said Sanjeev Prasad, co-head, Kotak Institutional Equities. "Economic growth will revive, and earnings growth should be strong going ahead."