The benchmark Sensex on Thursday touched a new all-time high during intra-day trade, as tax cut hopes kept sentiment buoyant. However, the index gave up most of the gains as some investors turned sceptical on whether the Centre would be able to push ahead with another round of tax cuts, given the fiscal constraints. Volatility in global indices, after the US Federal Reserve lowered rates but signalled a pause, added to selling pressure amid expiry of derivative contracts.
The index gained as much as 340 points in intra-day trade to touch a new all-time high of 40,392. The previous all-time high was scaled on June 4, when it had risen to 40,312.
However, it failed to close above the all-time closing high touched in June. The Sensex ended the session at 40,129, up 77 points, or 0.19 per cent — 140 points below its previous high. The Nifty ended with a gain of 37 points, or 0.31 per cent, to close at 11,881.
The indices have been on an upmove since the past five sessions, on reports that the government might abolish the dividend distribution tax (DDT) and rationalise the equity tax structure.
Further, better-than-expected earnings announcement and steady global indices had further bolstered certain stocks.
“The rate cut by the US Federal Reserve should promote the inflow of foreign funds. Although the Sensex is close to a record high, there are many stocks available at good valuations in the broader market,” said G Chokkalingam, founder, Equinomics Research & Advisory.
Foreign portfolio investors (FPIs) have stepped up buying amid cooling off of bond yields in the developed markets. On Thursday, FPIs bought shares worth Rs 1,870 crore, adding to their record purchase of Rs 7,200 crore a day earlier.
Market players said that while sustained buying by FPIs was helping sentiment, investors need to exercise caution given the economic headwinds.
“The current rally may not extend beyond another 3-4 per cent. Despite well-intended measures, there are no signs of a meaningful demand recovery or new investments. Earnings growth has not thrown any significant positive surprises, and the much anticipated personal tax cut seems to be on the anvil. Globally, the Fed has announced a cut but also signaled a pause in their guidance, and the US-China trade talks remain just work-in-progress,” said U R Bhat, director, Dalton Capital India.
Barring three, all the 19 sector sub-indices compiled by the BSE gained, led by a gauge of telecom companies.
Eighteen companies in the Sensex pack rose. YES Bank rallied the most at 24 per cent, after the lender informed stock exchanges that it had received a binding offer from a global investor for an investment of $1.2 billion in the bank through fresh issuance of equity shares.
State Bank of India rose 7.7 per cent, Infosys and Tata Motors rose more than 3 per cent.