Nifty hits fresh peak on recovery hopes

The 30-share Sensex also gained 250 points, to 32,433, 111-point shy of a new record high

The benchmark Nifty closed at a new record high on Friday after economic data surprised positively. The rupee ended three-week high of 64.93 against the dollar, while the yields on the 10-year benchmark government security softened two basis points to 6.73. The Nifty gained 71 points, or 0.7 per cent, to close at an all-time high of 10,167, surpassing its September 18 record. 

The consumer inflation for September held steady, against expectations of acceleration, and industrial output hit high a nine-month high, data released on Thursday showed. Market players said the reading sparked hopes of an economic recovery and of a less hawkish stance from the central bank.

“There are early signs of recovery in the economy. The medium-term picture looks positive,” said Raamdeo Agrawal, managing director, Motilal Oswal Financial Services.

The 30-share Sensex also gained 250 points, or 0.8 per cent, to 32,433, 111-point shy of a new record high. The Sensex had recorded its all-time closing high of 32,575 on August 1. Market players expect the Sensex to touch a new record before Diwali, which falls next week.

"The festive mood is clearly in the air, with the markets having hit fresh peaks. The direction change from the time markets took a breather at the end of September till today has been driven by better macro data,” said Kunj Bansal, chief investment officer, equity, Centrum Wealth.

At the end of September, the markets had come off as much as five per cent from their highs amid concerns over economic slowdown and tapering off balance sheet by the US Federal Reserve. The benchmark indices managed to recoup all the losses on the back of strong buying by domestic investors, particularly mutual funds (MFs). 

Domestic institutional investors (DIIs) bought shares worth nearly Rs 1,600 crore on Friday, while overseas investors pulled out close to Rs 1,700 crore from the domestic market. Since August, MFs have bought shares worth close to Rs 50,000 crore, thanks to huge retail investor inflows into equity schemes.

Meanwhile, foreign institutional investors (FIIs) pulled out over $4 billion (approximately Rs 26,000 crore) from domestic equities since August. Market players expect overseas investor selling to subside if the rupee and bond markets stabilise. 

“The current leg of the rally has been driven by a surge in liquidity, thanks to the impressive inflows received by MFs. Liquidity can continue to remain high as inflation and inferior returns of other asset classes is attracting more investors towards equities,” said Agrawal.

Banking stocks led to the gains on Friday with HDFC Bank and ICICI Bank, gaining 2.1 per cent 1.44 per cent, respectively. Shares of Bharti Airtel gained eight per cent and were the second-biggest contributor to Sensex gains after HDFC Bank. The telecom major gained after it announced it would buy Tata’s mobile business in a cash-free, debt free deal.