Bank stocks, US elections help indices march on towards all-time high

There was no stopping the indices this week. A rally in banking stocks, the US election results, and signs of revival in the domestic economy helped markets post a weekly advance over 5 per cent, the biggest since June.

The trend continued on Friday as well, with the benchmark indices rising over a per cent to end within striking distance of a new all-time high. The Sensex gained 553 points, or 1.3 per cent, to end at 41,893 — just 52 points shy of the previous record of 41,945 seen on January 17. The Nifty rose 143 points, or 1.2 per cent, to close at 12,263, just 89 points short of the record of 12,352 seen on January 17.

Friday’s gains were led by Reliance Industries (RIL) and banking stocks. RIL gained 3.8 per cent after it announced on Thursday that Saudi Arabia’s sovereign wealth fund had invested Rs 9,555 crore in Reliance Retail Ventures for a two per cent stake. The financial pack — HDFC Bank, HDFC, and Kotak Mahindra Bank — also made large contribution to market gains.

Most global markets posted strong gains for the week even as the US presidential election headed for a tight finish. Investors hoped that a spilt congress — with Democrats in the White House and Republicans holding the Senate — would be the best for equities as it would prevent corporate tax hikes and massive borrowing for spending.

Also, experts said if elected president Joe Biden could reduce trade risks presented by Donald Trump’s aggressive stance against China. Votes were still being counted in a handful of key US states on Friday. Meanwhile, US President Trump has questioned the credibility of the election, stoking fears of a stalemate and heightened uncertainty.

Markets were also enthused by the US Federal Reserve’s decision to leave interest rates near zero and making no change to asset purchases. The US Fed once again reaffirmed its commitment to do whatever it can in coming months to sustain US economic recovery. Meanwhile, the Bank of England increased its already huge bond-buying stimulus by a bigger-than-expected 150 billion pounds.

“Positive global sentiment from the US election, expectation of Fed open market operation, and improving economic activities added to the optimism. It can take the Indian market to a new zone overcoming worries over increasing Covid cases backed by a strong performance in sectors like banking, IT, pharma, and exporters. We expect this momentum to sustain aided by positive Q2 results, favourable economic data, strong foreign investor buying and expectations of an additional stimulus package,” said Vinod Nair, head of research, Geojit Financial Services.

Foreign investors remained aggressive buyers during the week.

“Markets are currently riding high on global optimism and favourable earnings announcements. As a result, the benchmark indices have also reached close to their record high. We might see a pause early next week. However, the bias would remain on the positive side, and there’ll be no shortage of trading opportunities. However, we feel traders should maintain extra caution in the selection of stocks as we may continue to see volatile swings across the board,” said Ajit Mishra, vice-president, research, Religare Broking.

Market breadth was positive with 1,477 stocks advancing as against 1,148 declining on the BSE. Over two-thirds of Sensex components ended the session with gains. Barring two, all BSE sectoral indices ended the session with gains. Energy and banking stocks gained the most, and their gauges rose 3.2 per cent and 1.8 per cent, respectively.