Sensex, Nifty reach new heights, India's global m-cap share at 6 year high: Here's what propelled this
May 3, 2017
Indian indices showcased a stellar performance last week with the BSE Sensex crossing psychological mark of 30,000 on April 26 along with NSE Nifty touching a record high of 9,367 on the same day.
Another milestone was achieved when India's contribution to the global market capitalisation (m-cap) touched it's all time high of $ 1.94 trillion and figured as the top performing market in 2017.
It was also one of the top markets by capitalisation world over.
The rally was driven by five index heavyweights: Reliance Industries, biggest contribution in the Nifty index, which contributed nearly 14.16 per cent of the total Nifty move in 2017.
Tata Consultancy Services is the India's most valued company with market capitalization of Rs4.51 trillion followed by Reliance Industries with m-cap Rs4.46 trillion.
This is followed by HDFC, HDFC Bank, L&T and ITC which contributed 12.58 per cent, 13.14 per cent, 8.56 per cent and 7.73 per cent respectively.
Further, seven out of the 10 most valued listed companies, HDFC Bank, ITC, HDFC, ONGC, SBI, IOC, and HUL, together added Rs 49,642.58 crore in market valuation in the last week of April.
HDFC bank stole the show with maximum gains adding Rs 11,998.43 crore to become the third most valuable company with a m-cap of Rs 3,95,547.46 crore.
LIST OF TOP 10 MOST VALUED COMPANIES IN M-CAP
In another show-stopping performance, Maruti Suzuki India (MSIL) on Tuesday closed at a new lifetime high of 2.52 per cent to Rs 6,690 on the BSE over the expectations of strong volume growth for the first quarter of the financial year 2018 (April-June).
So far this year, it gained 26 per cent.
Experts say that the surge in Maruti's share prices can be attributed to a demand rally on the back of positive rual growth and marriage season.
Maruti was Rs 1,234 crore shy away from becoming a part of the Rs 2 lakh crore m-cap club that includes six of the 10 most valued companies in terms of m-cap when the bourses closed on April 28th.
However, on Tuesday, Maruti entered the the top 10 most-valued listed companies at the tenth place with a market capitalisation of Rs 202,564.32 crore (or Rs 2.02 trillion) thereby becoming the seventh member of Rs 2 lakh crore m-cap club.
India's largest automaker became the first Indian carmaker to achieve this milestone.
A lot of what was seen in the market last week can be credited to the surge of FII and DII inflows which have clocked record highs in the past few months. Let's look at the numbers:
Foreign Institutional Investors (FII) investment into Indian equities and bonds for the month of April touched $ 3.5 billion after market regulator Sebi raised the ceiling for FIIs in government debt.
According to the data, FPIs in April invested a net amount of Rs 2,394 crore in equities and a further Rs 20,364 crore in the debt segment resulting in the combined inflow of Rs 22,758 crore (or $3.5 billion).
FII investments in the Indian capital market for the month of March hit a record high logging the biggest inflow since 2002 with overseas investors buying $8.84 billion worth of shares and bonds.
The total inflow for the year 2017 reached Rs 91,385 crore ($14 billion) in the capital markets.
In a statement on Friday, Finance Minister Arun Jaitley said that the Indian economy has benefitted from foreign investment during a period of sluggish private domestic investment.
Adding to this, the Finance Minister said that Foreign direct investment (FDI) inflows into India in 2016 jumped 18 per cent to a record $46.4 billion, at a time when global FDI inflows fell.
Sebi Chairman Ajay Tyagi noted at industry chamber CII's annual session that the rupee continued to gain against the US dollar this year and that Indian financial markets have shown strong growth.
Experts say that liquidity is the main factor propelling the movement of inflows post the cash crunch spell. Here's how:
"The last financial year saw a number of measures by the government to set a business friendly environment. The GST, for one, will push up the GDP by more than 3 per cent coupled with tax reforms and financial consolidation. We have already seen higher tax collections in the last quarter," says Mustafa Nadeem, CEO, Epic Research.
A surge in the Midcap space also indicates a flow of liquidity and this is only projected to carry froward in the capital markets.
"Further, Midcap stocks have come in the focus in a bull market. Wave analysis indicate a rally in the Midcap space in the coming months, with participation of Smallcaps as well," added Nadeem.
According to Deepak Jasani, Head - Retail Research, HDFC securities, the main reasons for markets hitting all time highs are expectations of stable rupee, attractive near term returns and lack of alternative investment avenues yielding similar returns.
But Jasani points out that earnings growth are yet to catch up with the rally.
"When it comes to market capitalisation, the rise in stock prices are the main reason," he says, "while new listings from private and public sector undertaking space also contributed".
This will eventually create and sustain a wealth effect in the economy and lead to higher consumption growth.
Another positive effect on the economy, as told by Jasani, is the encouragement of savings and funding equity portion in new ventures in the market.
Additionally, a highly liquid economy will bring the interest rates in the system down and even improve the current account balance of the Indian government.
Finally, such an environment will also ease the pressure on Rupee thereby improving the value of the Indian rupee.