Sensex ends above 56K, Nifty scales a new high

Mumbai: India's benchmark indices ended at record closing levels on Friday. The Sensex finished above 56,000 and the Nifty ended past 16,700 — both for the first time. Gains were however measured as investors awaited US Federal Reserve Chairman Jerome Powell's remarks on Friday at the annual Jackson Hole symposium.

The Nifty ended up 68.30 points or 0.41% at 16,705.20 after touching an all-time high of 16,722.05 during the day. The Sensex ended up 175.62 points or 0.31% at 56,124.72.

Powell said the Fed could begin scaling back bond purchases this year, though it won’t rush to raise interest rates, Bloomberg reported late on Friday. The US economy has made “substantial further progress” on inflation and the labor market has made “clear progress,” Powell said in the text of his Jackson Hole address. The S&P 500 and the Nasdaq hit record highs after Powell’s comments. The S&P 500 was up 35.11 points, or 0.79%, at 4,505.11, at the time of going to press, while the Nasdaq Composite rose 161.06 points, or 1.08%, at 15,106.87. The Dow Jones Industrial Average was up 213.04 points, or 0.61%, at 35,426.16.


Fund managers expect that any shift will be measured.

“It is not going to happen in a hurry despite strong payroll numbers in the US. They may not want to jeopardise the whole recovery process,” said Vinit Sambre, head of equities at DSP Investment Managers.

Breather for Broader Market
"While tapering has to happen at some point, they may want to push it out a bit more," said Sambre.

The broader market got a breather from the recent rout with the S&P BSE Mid and SmallCap indices gaining 1%.

Sentiment has been jittery in August so far as investors have been fretting over the likelihood of a sooner-than-expected reversal of the US stimulus programme that has pumped billions of dollars into various markets worldwide. On Friday, overseas investors sold shares worth almost Rs 779 crore, while domestic institutions were net buyers to the tune of Rs 1,646 crore.

This marked the fifth consecutive day of selling by foreigners. They have sold equities worth ₹5,300 crore over the week but remain buyers for August with net purchases amounting to ₹2,765 crore.

Continued purchases by local mutual funds and insurance companies have helped the Sensex and Nifty advance, outperforming most regional peers.

So far in August, the Sensex is up 6.7%, taking gains in 2021 to 17.5%. The MidCap index is up 0.7% while the SmallCap index is down nearly 2%. Outside the indices, many mid- and small-cap stocks are down at least 20-30% from their highs in July. So far this year, the MidCap index is up 29.6% and the SmallCap index is up 45%.

Companies must deliver in line with market expectations for stock prices to sustain at these levels.

"India is also grappling with high input prices besides lower monsoon at a time when earnings expectations are high," said Sambre.

Brokerages said the market is also nervous about the resurgence of Covid-19. "There are dark skies on the horizon. Global economies are facing risks in the form of a resurgent pandemic and inflation," said Centrum Broking. Domestically, the primary threat comes from multiple GDP downgrades, the brokerage said. "As the pace of vaccination remains heterogeneous across the world, the USD strengthens, and the Fed likely to cut back bond purchases, EMs face increasing risk of capital outflows."

On Friday, UltraTech Cement, Larsen & Toubro, Dr Reddy's, Sun Pharmaceutical Industries and Bajaj Finserv were the top gainers, moving up 1.5-3.6%. Infosys, IndusInd Bank, M&M, Nestle India and HCL ended down 0.4% to 1.1%.