50,000 & nonetheless counting: liquidity pushes markets, all eyes on Budget now

The benchmark Sensex Thursday breached the 50,000-mark for the primary time earlier than retreating to shut at 49,624, a fall of 167 factors or 0.34 per cent over Wednesday’s closing.
The rise and rise of markets over the previous few months has been pushed by a mix of exterior elements: international liquidity, vaccine hopes, US election end result, alongside the rising power within the home restoration. But market specialists mentioned that the elements shaping its future momentum would be the nature of the federal government’s spending programme to be unveiled within the Budget, the length of RBI’s financial stimulus and the verify on inflation.
The Sensex, which surged to a excessive of fifty,184, lastly closed the day at 49,624.76, a lack of 560 factors from the day’s excessive degree.
If the close to 70-per-cent rise in markets since April 1, 2020 has come regardless of the economic system contracting and being caught within the pandemic quicksand, market contributors stay optimistic over the movement of funds into Indian equities by international portfolio traders. Between April 1 and January 21, the FPIs have invested a web of Rs 2,41,021 crore into Indian equities, the very best ever in any yr.
Rashesh Shah, chairman and CEO, Edelweiss Group, mentioned that if a easy transition within the US has been an enormous optimistic, the bounce-back in home economic system has been very sturdy given the uptick in metal, cement, auto, actual property and in broader consumption. Arguing that the economic system wants help for a minimum of another yr earlier than it may well take off by itself, Shah mentioned: “For the next 12-18 months, the government needs to spend and they have got the liberty to spend because of Covid; even the RBI needs to maintain its liberalism. Spike in inflation and early tightening of monetary policy by RBI are the biggest risks for now.”

There is a broader sense that with the worldwide liquidity persevering with and an extra US stimulus on its approach, the markets are prone to proceed with their upward motion for now.
“Overall, we expect the upward journey to continue on the back of healthy corporate earnings, strong liquidity, positive developments on the vaccine front, broad-based economic recovery and low interest rates,” mentioned Motilal Oswal, MD&CEO, Motilal Oswal Financial Services. “Buzz around the upcoming Budget has also added strength to the markets.”
While the acquire of 5,000 factors in Sensex has are available in round 32 buying and selling periods, Deepak Jasani, Head of Retail Research, HDFC Securities, mentioned that this displays the expectations of a turnaround within the economic system post-Covid vaccinations and continued FPI inflows. “After the Budget, we may witness a temporary brake to the uptrend and further up move from hereon will depend on the pace of economic and corporate earnings growth and the trajectory of inflation and interest rates in India and the world,” Jasani mentioned.

Significantly, the surge has not been restricted to a couple shares and sectors. If the Sensex has risen by 68 per cent, the mid and small cap indices at BSE are up 80 per cent and 93 per cent respectively in the identical interval. Among sectoral indices, whereas Auto index has jumped 117 per cent, steel and IT indices are additionally up by 110 per cent and 105 per cent respectively. Technology, capital items and healthcare, banking and client sturdy indices, too, are up by over 60 per cent.
Indices embody better-run firms and so the rise in additionally reflective of the truth that good and robust firms have performed effectively. Investors must be cautious whereas venturing into random shares within the mid and small cap area.
Waqar Naqvi, CEO, Taurus Mutual Fund, mentioned that the rally in banking, PSU, metals, auto and IT sectors helped the Sensex contact 50,000. “If midcap stocks join the party, which is a high probability, on the back of the vaccinations and anticipated announcements in the central Budget to boost demand, the stock markets should continue to do well in the foreseeable future. From this level, minor ups and downs are not going to bother investors,” he mentioned.