Buoyed by revival in GDP growth and a dip in the current account deficit for the quarter ended June 2014, the benchmark Sensex at the Bombay Stock Exchange on Tuesday crossed the 27,000 mark, a day after the Nifty at NSE hit the 8,000-level milestone. Continuing its surge for the eighth straight session, the Sensex closed at 27,019 on Tuesday. The index has risen by 700-points or 2.7 per cent in the eight sessions. Replicating the surge, the Nifty too closed at a new high of 8,083.
The BSE bellwether had breached the 22,000 mark for the first time on March 24, 2014, and by surpassing the 27,000-mark for the first time on Tuesday, it has crossed six milestones over six months.
“Both economic and corporate fundamentals are improving, even though these are early days. Auto, cement and some other sectors have shown strong volume growth,” said Harsha Upadhyaya, chief investment officer – equity, Kotak Mutual Fund.
The government’s move to speed-up clearances of stalled projects and focus on opening up key sectors for foreign direct investment has also been taken as a big positive by investors. Additionally, softening of global crude prices, which has been a factor in the dip in CAD, has also boosted sentiment. While the real GDP expanded by 5.7 per cent in Q1FY15, compared to 4.6 per cent in the previous quarter, the CAD narrowed sharply to 1.7 per cent of the GDP or $7.8 billion in the first quarter of the fiscal. Further, boosting the markets, foreign institutional investors invested a net of Rs 1,227 crore over the last two trading sessions when the Sensex and Nifty have risen by 1.4 and 1.6 per cent, respectively.
“With steady US bond yields despite ongoing taper and most other central banks in easing mode, the global liquidity is strong and is looking for better investment avenues in emerging markets. Monthly emerging market fund inflow in August, at $3.8 billion, was the second best in a decade. With domestic fundamentals on an improving trend, India is well positioned to receive global flows,” said Upadhyaya.
While the Indian markets are trading high on valuations and look expensive relative to those of Brazil, Russia, China and Turkey, some experts feel that there is no reason to worry on the valuations front.