Sensex atop Mt 54K amid FPIs' renewed appetite; HDFC rises 4.8%

Renewed optimism around the domestic economic outlook, following an improvement in high-frequency indicators underpinned more than 3 per cent jump this week, so far

The benchmark indices rose for the third straight session on Wednesday, with the Sensex comfortably breaching the 54,000-mark, as risk appetite increased following a retreat in the dollar and a fall in US bond yields. Renewed optimism around the domestic economic outlook, following an improvement in high-frequency indicators -- such as manufacturing PMI, GST collection, and the Google mobility data -- underpinned more than 3 per cent jump this week, so far.
 
The Sensex ended the session at 54,369, following a gain of 546 points or 1.02 per cent. The Nifty rose 128 points and ended the session at 16,259 or 0.8 per cent.
 
The yield on 10-year US Treasuries hovered around 1.18 per cent, while the dollar slipped for a third day against major global currencies.

“With the improvement in key macro data, overseas investors have turned buyers in the equity market after being net sellers last month. Further, the recent spate of IPOs and their success indicates the appetite for mid- and small-cap stocks. Overall, we remain constructive on the market,” said Naveen Kulkarni, chief investment officer, Axis Securities.

After pulling out over Rs 14,000 crore in July, foreign portfolio investors (FPIs) have turned net buyers of domestic equities. On Wednesday, they bought shares worth Rs 2828.57  crore, taking their two-day buying tally to Rs 4,950 crore.
 
Nimish Shah, chief investment officer, Waterfield Advisors, said while the low base effect is influencing the year-on-year returns reported by large corporates, overall positive traction in the economy is turning out to be promising.
 
Financial stocks led the market charge on Wednesday. HDFC, the nation’s largest mortgage lender, rose 4.8 per cent, extending its four-day gain to 11 per cent. Kotak Mahindra Bank jumped 3.74 per cent, ICICI Bank added 3.6 per cent, and HDFC Bank gained over 2 per cent. These four stocks alone made a 543-point contribution to Sensex gains.
 
The gains in financial stocks come days before the RBI's monetary policy meeting. The central bank is expected to keep the rates low. Sustained buying by local funds and investors has also kept the sentiment robust.
 
Market observers said sector rotation was at play, with financial stocks that have been laggards this year gaining. Technology and consumer stocks on the other hand fell.
 
The buying has continued despite the tepid earnings season. As many as 21 of the 33 Nifty companies that announced their results, so far, have missed analyst estimates.
 
The market breadth was negative, with 1,137 stocks advancing and 2,119 declining. Most sectoral indices declined. Telecom and realty stocks fell the most, and their sectoral index declined 2.3 per cent and 1.7 per cent, respectively.
 
Other Asian peers traded mixed amid concerns over developments in China and the slow vaccination rate.
 
Investors are also concerned about the growth prospects in China as the country is dealing with the biggest outbreak of Covid since the Wuhan surge.