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  • 4 things to know about Sensex hitting an all-time high

    Publish date: 12th July

    Sensex had been hovering near its all-time high for the last few days before it finally hit its high point on Thursday. The 30-stock index surged by more than 200 points and reached its all-time peak of 36,525.94, going past the previous high of 36,443. So, here are some of the reasons that have contributed to the latest Sensex surge:

    1)   Reasons for the rise

    Favourable expectations for the first quarter earnings of Indian companies is a major contributing factor. IT giant Tata Consultancy Services (TCS) posted very strong quarterly results on Wednesday. Similarly, the market expects positive results from most companies and sectors. Stability in crude oil prices and the rupee have also been contributing factors. After reaching a new all-time low of 69.09 in June, the rupee has stabilised in the 68-69 range.

    The last five hundred points rally in Nifty has been led by eight stocks (TCS, Reliance Ind., HDFC twins, Kotak Mahindra Bank, Infosys, HUL & Maruti Suzuki). These stocks account for ~44% of Nifty-50 market cap and are up by 10% on an average since 23rd May when Nifty was below 10,500 level.

    2)   How this happened despite global factors

    The ongoing global trade war has been a cause for concern for many countries. However, India’s share in the total global trade is only 2%. As a result, the current trade war does not pose a major threat to the Indian economy. In fact, many companies in sectors such as pharma and textiles stand to gain from this current trade war. Read more about impact of trade wars on India here.

    3)   Key inflation data

    Further market movements in the short-term could be determined by factors such as key inflation data and the corporate earnings season. The Consumer Price Index-based (CPI) inflation for June and Index of Industrial Production (IIP) data for May is due to be released on July 12.

    4)   Risks ahead

    Crude oil prices experienced the biggest single-day fall (6.9%) in the last two years on Wednesday. However, market participants will closely observe how the prices could change in the coming months. In case the crude oil prices rise beyond $80 per barrel, the Indian economy could be in a spot of bother. In addition, a sharp appreciation in the US dollar against the rupee could have an adverse impact on the Indian markets.

    What our experts say

    The currency depreciation has helped IT stocks deliver handsome returns in the last one month. Valuations are rich hence upside could be limited. We expect Nifty to pause at ~11,200 which was the previous peak. Returns in future will be based on earnings growth rather than PE expansion. India has been better off than other emerging markets in terms of FII outflows. Local flows led by SIP has led to Mutual funds investing USD 10 bn in equites this calendar year to date. For markets to deliver double digit returns we need both FIIs and MFs to be buyers in the market.

    The bottom line

    Analysts expect volatility in the stock market in the short term. But that said, the all-time Sensex high is a landmark moment. The Nifty too opened strong on Thursday, breaching the 11,000 mark. As for the future, many experts believe that Sensex could cross the 37,000 mark by the end of the calendar year.

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