Sensex Crosses 75,000 Mark: The Rally and What’s Next

Kotak Insights | 19/04/2024

The Sensex soared past the 75,000 mark for the first time in April 2024.

This marks a significant moment for investors and traders who have been tracking the market’s progress lately.

For market participants, this brings up a question: "Is this the right time to dive into the market, or should we brace for a potential correction after such highs?"

Let’s take a look into the factors driving the market rally to answer this question and understand what future trends we could expect.

The 75,000 Rally

First, let us understand what this rally is about.

For the first time, the BSE Sensex broke through the 75,000 barrier on 9th April, 2024.

The Nifty 50 also soared above the 22,700 level during the same week. The rally was also seen in broader markets and the combined market capitalisation of BSE-listed companies hit the Rs 400 lakh crore milestone first time ever.

Strong domestic macroeconomic indicators and positive market sentiment supported this.

Here are a few factors potentially pumping this rally…

Key Factors Pushing the Rally

Economic Stability and Inflation Control

In the quarter ending December 2023, India's GDP growth rate reached 8.4%, surpassing the RBI's projections. This reaffirms India's position as the fastest-growing major economy globally.

Moreover, the recent moderation in March consumer price index (CPI) inflation to a 10-month lowe at 4.85% and the stabilization of core inflation have played key roles in maintaining the market cheer. The inflation is not near, but slowly moving to RBI’s comfort level of 4%.

Investment and Industrial Growth:

India’s factory output growth, as measured by the Index of Industrial Production (IIP) rose 5.7% in February, up from 3.8% in January. In February, mining production rose 8%, and power output increased 7.5%, while manufacturing output grew 5%. Furthermore, the ongoing resilience in the investment and services sectors underline the economic vibrancy that is translating into market confidence.

Monetary Policy and Growth Projections:

The RBI’s steady stance on keeping the repo rate at 6.5% while focusing on monitoring inflation to achieve a medium-term target of 4% inflation has reassured investors about the market's stability.

FPI’s Return to the Arena:

Lastly, we have the foreign portfolio investors (FPIs) betting on India.

As per NSDL data, overseas inflows into Indian equities rose to a three-month high of Rs 350.9 billion in March. In the 12 months ending March, foreign portfolio investors bought Rs 2.08 trillion worth of Indian shares, the second highest on record.

What to Watch For: The Road Ahead

As the market celebrates this milestone, investors should remain vigilant and consider several key aspects that could shape market dynamics in the near future:

• Global Economic Uncertainties: With increasing geopolitical tensions and unpredictable global markets, one should stay informed and agile to navigate potential volatility.

• Elections, Policies, and Fiscal Health: The outcome of general elections, changing government policies, especially those related to fiscal consolidation and public expenditure in key sectors like infrastructure, could potentially influence market movements.

• Q4 Earnings and Sector Performance: The ongoing fourth quarter results (Q4FY24) announcements could provide deeper insights into the market's sustainability and sector performance.

• Interest Rates and Inflation: Global central bank’s decision to keep interest rates higher, rising inflation across major economies, and soaring crude oil prices could also potentially influence the market sentiment.

So, as traders and investors, it's crucial to keep these expectations in check.

Invest or Wait?

As the Sensex charts unknown territories, the dilemma is whether to invest now, hold off, or exit the market.

Market participants should consider whether they are prepared for possible fluctuations and assess their investment strategies in light of current market environment.

In this dynamic market environment, patience and strategic planning are key.

So, as one goes about approaching the market, the emphasis should be on informed decision-making, adaptability, and a focus on market fundamentals.

Here's a wise thought from Benjamin Graham to keep in mind: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

It's like a little reminder that the quick ups and downs in the market are a bit like voting – things can change in a short time. But what really matters, the big value, comes from looking at the underlying market fundamentals that shape how investments and markets succeed.

We’ll be back with another exciting story next week!

Until then - Happy learning!

Sources and References:

• Economic Times
• BSE
• NSE
• PIB
• NSDL

Disclaimer: The content of this blog is intended solely for educational purposes and should not be regarded as financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The securities and assets mentioned serve purely as illustrations only and should not be taken as recommendations for investment. Please note that the information presented is compiled from several secondary sources available on the internet and may change over time. We strongly advise consulting with a qualified financial advisor prior to making any investment decisions. Read the full disclaimer here.