Sensex tops 58,000 in best week since May, completes 10,000-pt rise in 2021

India’s benchmark indices posted their best weekly gains in over three months as overseas investors intensified their buying, encouraged by dovish commentary by the US central bank.

The Sensex surged 3.6 per cent during this week — the most since the week ended May 23 — to end at 58,130. The index notched its 38th fresh record close for the year. The Nifty50 index closed at 17,324, rising 0.5 per cent on Friday and 3.7 per cent for the week after gaining in four out of the five trading sessions.

The Sensex on Friday completed its 10,000-point climb (a 21.4 per cent gain) for the year, surprising even some of the most bullish forecasters on D-Street. The index had started 2021 at 47,751, with many predicting single-digit returns for the year.

Both domestic and foreign investors have joined forces this year, propelling the market to record levels. Foreign portfolio investors (FPIs) have pumped in more than Rs 50,000 crore in 2021, while mutual fund (MF) buying has exceeded Rs 20,000 crore. Besides, the record number of new investors that have entered the market over the past 18 months have been aggressive buyers.

The combined market cap of all companies listed on the BSE has risen to Rs 254.2 trillion — an increase of Rs 150 trillion, or 2.45 times, from the March 23, 2020 low of Rs 103.7 trillion. This enormous wealth creation has been underpinned by aggressive policy measures by global central banks to revive the economy battered by the Covid-19 pandemic.

The Fed has expanded its balance sheet to $8.4 trillion, nearly double its size in March 2020. Last weekend, the US central bank indicated that it would begin reducing its monthly bond purchases this year but would not hike interest rates in a hurry. The comments made by Fed Chairman Jerome Powell have boosted sentiment, sending US bond yields and dollar lower and risky assets soaring.

FPIs on Friday bought shares worth nearly Rs 770 crore, taking their weekly buying tally close to the Rs 7,000 crore mark.

Nearly half of the 2021 gains have come in August, when the Sensex soared 9.4 per cent — the most since November 2020. Some saw the gains as shallow as only seven index components accounted for two-thirds of the gains. Also, the advance-decline ratio for the month was lowest since March 2020.

“There is no reason for the market to fatigue. Today, about 15-20 companies are driving 90 per cent of the country’s profit growth. These companies are consistently growing their profits at 20 per cent and compounding free cash flow at 25 per cent. We expect them to continue to compound at this rate. There is nothing unusual about this. We have seen something similar play out in the US and Japan. This is how small economies have become bigger,” said Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers.

Friday’s gains were propelled by Reliance Industries (RIL), which rose 4.1 per cent to end at Rs 2,388, surpassing its previous all-time high made a year ago. If not for RIL, the Sensex would have ended Friday’s session in red as it made a 278-point contribution to the index gains.

Global markets traded mixed on Friday as investors turned cautious ahead of the US jobs report.