Bulls party hard as earnings fuel rally: Sensex tops 37K, gains for 6th day

Markets gained for the sixth straight sessions on Friday, as investors continued to lap up shares of companies with positive earnings momentum.

The Sensex rose 352 points, or 0.95 per cent, to end at 37,337, led by gains in index heavyweight ITC, whose shares rose 5.24 per cent. The index posted an all-time high every day this week. The Nifty gained 0.99 per cent, or 111 points, to end at 11,278, with 35 of its components ending with gains. The Nifty Smallcap 100 and Nifty Midcap 100 index, too, ended with gains of around a per cen.

"Growth and earnings outlook is showing signs of pick-up, which has elevated market to new highs," said Vinod Nair, head of research, Geojit Financial Services. "Notably, midcaps have also participated in the rally as the worst of earnings seems to be over. However, valuations remain on higher side compared to large caps."

In a reversal of trend, small- and mid-cap indices outperformed benchmark indices. In the last six sessions, the Nifty Smallcap 100 index gained 6 per cent, while the broader Nifty gained 3 per cent, narrowing the underperformance seen this year.

Both foreign and domestic institutional investors (FIIs and DIIs) were buyers in the cash segment. FIIs were net buyers of around Rs 7.4 billion, while DIIs bought around Rs 4 billion, provisional data provided by stock exchanges showed.

“Markets are enthused by the improvement in earnings growth trajectory from single-digit to double-digit,” according to Devang Mehta, head, equity advisory, Centrum Wealth Management. “The difference has been the improvement in market breadth, with all sectors participating in the rally.”

Investors lapped up shares of ITC and Bharti Airtel, who posted improvement in earnings after market hours on Thursday.

Net profit at 13 of the 21 Nifty firms that have reported earnings so far met or surpassed estimates, data compiled by Bloomberg showed.

Market players said the next big triggers would be policy announcements by the Reserve Bank of India (RBI), European Central Bank and US Federal Reserve. The RBI, which increased policy rates in June for the first time since 2014, is set to review its monetary policy on August 1. Eighteen out of 24 economists expect it to hike rates while the rest expect hold, according to a Bloomberg survey of economists.

Derivatives experts said high rollovers during the expiry of July series contracts on Thursday indicated a positive momentum in the market. Sneha Seth, derivative analyst at Angel Broking, said the Nifty could inch towards 11,500.

Yogesh Radke, head of alternative and quantitative research at Edelweiss Securities, said the Nifty could move to 11,300, but volatility could increase given key events such as meetings of central banks.