Sensex sees biggest monthly gain since January 2012

42 points shy of all-time high; markets likely to be robust in November

October has seen the Indian equity markets report their biggest monthly gain since January 2012, with the S&P BSE Sensex and CNX Nifty registering their biggest monthly gains in percentage and absolute terms on strong flows from investors abroad. While the Sensex gained 1,785 points, or 9.2 per cent in October, the CNX Nifty surged 564 points, or 9.8 per cent.

On Thursday, the benchmarks ended at their record high, with a gain of one per cent at 21,165 (Sensex) and 6,299 (Nifty). The Sensex is now 42 points away from its all-time high. Market turnover hit the Rs 5-lakh crore mark for the first time. Among sectoral indices, the S&P BSE consumer durable index was the top gainer, up 2.65 per cent followed by the PSU index (up 2.5 per cent) and the Banking index (up two per cent). The S&P BSE metal and S&P BSE oil and gas indices moved up 1.7 per cent and 1.4 per cent, respectively.

Liquidity-driven rally
Foreign institutional investors (FIIs) have pumped in $2.55 billion (Rs 15,706 crore) in the equity market since September, the highest in five months, by Securities and Exchange Board of India’s data. In January 2012, the indices had gained 12 per cent each, with FIIs making a net investment of $2 billion (Rs 11,000 crore) during the period.

With two key economic events — the US Federal Reserve’s meeting regarding the taper of the $85-billion-a-month bond buying programme and the Reserve Bank of India’s review of the monetary policy behind us — analysts suggest the markets would mostly remain stable in November. “In the absence of any major macro-economic event in November, the markets are likely to remain strong on a liquidity basis. Markets will also take cues from the Assembly elections and the results. With most opinion polls showing the Bharatiya Janata Party as ahead in the race, it could boost the overall sentiment,” said Vaibhav Sanghavi, director equities, Ambit Holdings.

“I don’t see any sharp correction at least in November. At the same time, one needs to be mindful of the next US Fed policy meeting, which can spring in some element of surprise. Private banks and automobile stocks would continue to do well in November.”

Deven Choksey, managing director and chief executive, K R Choksey Shares and Securities, says, “The markets have moved up in October on strong FII flows. As long as the liquidity position remains intact, I don’t think those would correct sharply. On the contrary, November could see markets taking cues from the state elections.”

“Overall, the momentum is likely to remain intact the next month, though there can be some intermittent corrections, but support buying is likely to kick in. Nifty is likely to remain in 5,900–6,400. Sesa Sterlite, Tata Motors and Reliance Industries seem investment-worthy.”