BSE m-cap hits record high, 10 stocks rise up to 200%; did you miss the rally?
Over 80 per cent of the participants said the Nifty50 could rise to 9,000 and 9,200 levels before June end. But there could be sharp gyrations on the way up.
The rally that we have seen since January was broadbased, as nearly 40 stocks rose more than 50 per cent on BSE, including names like Niraj Cement, Prakash Industries, JP Associates and Arshiya, among others, while two stocks – Maha Rashtra and North Eastern Carrying Corp – more than doubled investor wealth in the same period.
There was a lot of uncertainty ahead of the Union Budget 2017 with respect to various taxes on capital market investors as well as the fiscal deficit number. Foreign portfolio investors (FPIs) were seeking clarity with respect to the general anti-avoidance rule (GAAR) as well as a tax on indirect transfer.
But the government managed to dispel these fears, which led to a smart rally on Dalal Street. Experts say the rally, which has already added 1,600 points to the Sensex and nearly 600 points to the Nifty50, has more legs.
Majority of the 30 money managers and research heads polled by ET expect the Nifty50 to gain 3-5 per cent till June 30. Over 80 per cent of the participants said the Nifty50 could rise to 9,000 and 9,200 levels before June end. But there could be sharp gyrations on the way up.
Despite challenges, the government walked the path of fiscal discipline, which got a ‘thumbs up’ from analysts. Further, clarity on FPI taxation as reflected in the Union Budget came as music to investors’ ears.
Finance Minister Arun Jaitley proposed that Category I and II foreign portfolio investors (FPIs) should be exempted from taxation on indirect transfers. However, the indirect tax provisions will still apply to Category III foreign portfolio investors such as corporate bodies, trusts and family offices.
The market has done well on the Budget Day and thereafter. The market added 8 per cent in open interest, which was highest since 2011. The rise on the Budget Day was the highest in percentage terms since 2005 at 1.8 per cent.
“The futures market added 8 per cent open interest on the Budget day, which was highest since 2011. But what is more important is the fact that this rise saw a followup buying on Thursday. This paves way for the market to move higher,” Vinod K Sharma, Head of Business, Private Client Group, HDFC Securities, told ETMarkets.com.
“While technical analysts are not sanguine on the market, we are. The BSE market capitalisation has quietly closed at an all-time high, though the Nifty and the Sensex may be far away from their March 2015 highs,” he said.
Sharma said the bulls are here. It’s time for the bears to go into hibernation.
Equities emerging as preferred asset:
The way domestic institutional investors (DIIs) have supported the market in 2016 at a time when foreign portfolio investors (FPIs) were on a selling spree suggests a shift in trend, which is likely to continue in the future as well, experts said.
Foreign portfolio investors (FPIs) have pulled over Rs 5,000 crore from the domestic equity market in January. They are pulling out money from both debt and equity markets since the start of the year. But the trend is changing.
“For India, we have less to worry on that front, because we are seeing structural shifts in the domestic household balance sheets and equity is becoming a popular asset class,” Ridham Desai, Morgan Stanley, said in an interview with ET Now.
“Over the past two years, domestic flows have outstripped FII flows on a cumulative basis and that had not happened for the previous two decades. These are big shifts happening in India,” he said.
Latest data suggests domestic institutional investors (DIIs) pumped Rs 4,750 crore into domestic equities in January, in addition to Rs 9,136 crore inflow seen in December and Rs 18,227 crore in November.
Desai said domestic flows will sustain over the coming years and, therefore, the relevance of FPI flows will actually reduce.