Optimism fuels bull run; indices at record highs

Mumbai: Indian shares clocked fresh record closing highs on Thursday, riding a wave of renewed optimism, bolstered by hopes of continued liquidity in the US and waning fears of Covid amid a pickup in domestic vaccinations. Tata Consultancy Services, Hindustan Unilever and Reliance Industries kept the bullish momentum intact as investors churned their stock portfolios in favour of blue chips.

The Sensex ended up 514 points, or 0.9%, at 57,852.54 after hitting a high of 57,892.37 during the day. The Nifty ended up 157.70 points, or 0.9%, at 17,234.35 after touching a record of 17,245.50 during the day.

The Volatility Index—a popular fear measure—rose by a marginal 0.4% to 14.2 on Thursday, suggesting traders do not expect major risks to the market at current levels.


“The taper risk has been considerably brought down by the Fed statement and market is not fearing any imminent hike in interest rates,” said Piyush Garg, chief investment officer at ICICI Securities. “Globally, markets have done well so Indian markets are also rising.”

The Sensex and Nifty have risen over 3% in the past four trading sessions and 9% since August 1.

US Federal Reserve Chairman Jerome Powell's dovish comments on the tapering of bond purchases on August 30 gave fresh impetus to the market, which had been awaiting triggers amid concerns that the rally since March 2020 had stretched stock valuations.

‘Investors Moving Money to Large-caps’
“The dovish stance of the Fed has reduced the fear and has brought back the risk-on sentiment. Large raising by domestic mutual funds could also be getting deployed in the market,” said Vinit Sambre, head of equities at DSP Investment Managers. “Sentiment has returned after the second wave; August data points have been strong. There's no big negative, which is a positive.”

Fund managers said investors are now moving money to large-cap stocks, which have been underperformers since January, from mid- and small-cap stocks.

On Thursday, TCS was the biggest Sensex gainer, advancing 3.3%. Hindustan Unilever and UltraTech Cement gained 2.5% each while Dr Reddy's Laboratories, Nestle India, Kotak Mahindra Bank, Titan Company and IndusInd Bank ended up 1-2%.

“People are taking money off small and midcaps and buying large caps. So, a rotational trade is happening,” said Jyotivardhan Jaipuria, managing director at Valentis Advisors. “The general feedback on the economy front is that it is improving every month.”

Foreign portfolio investors bought shares worth a net ₹348.5 crore on Thursday. Their domestic peers too were net buyers to the tune of ₹381.7 crore.

Besides dovish commentary by the US central bank, high daily vaccination figures and economic normalisation is also helping markets hold up even as the risk of a third Covid wave remains.

“Most states have further eased restrictions related to malls, theatres and offices. This, along with a pick-up in vaccinations, should pave the way for economic normalisation over the coming months as long as India can avoid a significant third Covid-19 wave,” brokerage CLSA said in a note on Thursday.