Saturday, May 18, 2024

Sensex and Nifty Reach Lifetime Highs; Overvaluation Concerns Loom Over Small Cap Segment


Sensex, Nifty at Lifetime High But Valuations of Small Cap Segment Elevated and Unjustified

The Indian stock market began the week with significant gains, registering new all-time highs. The BSE Sensex surged by 494.28 points to reach a high of 74,742.50, marking a 0.67 percent increase. Similarly, the NSE Nifty saw a boost of 152.60 points, ending the day at 22,666.30, reflecting a 0.68 percent rise. The market breadth was almost even, with 1,695 shares advancing, 1,733 declining, and 108 remaining unchanged.

Among the performers on the Nifty, Eicher Motors, Maruti Suzuki, M&M, SBI Life Insurance, and NTPC led the gains, while Adani Ports, Nestle India, Apollo Hospitals, Wipro, and Sun Pharma faced downturns. Most sectors wrapped up the day in the green, with the auto, metal, oil & gas, and realty sectors posting around 1 percent gains each. However, the Information Technology and PSU Bank sectors lagged behind.

The BSE Midcap index recorded a modest rise of 0.26 percent, whereas the Small cap index ended the day almost flat. This slight discrepancy highlights the broader market trends and the specific performance of various market segments.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “The robustness of the Indian economy, along with sustained capital flows into mutual funds and the enthusiasm of domestic investors, can support this rally. However, valuations of the Small cap segment are elevated and unjustified.”

Investor attention in the near term will be directed towards global market cues, with significant developments expected in the coming weeks. The early trade will closely monitor the March quarter results, starting with Tata Consultancy Services on April 12th, marking the onset of the earnings season. Additionally, the minutes from the last meeting of the US Federal Reserve, set to be released on April 10, and China’s consumer price inflation data for March, also scheduled for April 10, will be of high interest.

Despite the positive note of the fiscal year, foreign investors withdrew some funds from Dalal Street. In the week ending on April 4, Foreign Portfolio Investors (FPIs) sold stocks worth Rs 1,822 crore in the secondary market, reflecting a cautious stance amid a dynamic global economic environment.

Earlier fluctuation in US bond yields, driven by changing expectations around Federal Reserve’s rate cuts, has impacted foreign capital flows into India. Initially, the market anticipated six rate cuts in 2024, later adjusting the forecast to three cuts due to a tight US labor market. Recent perspectives suggest only two potential rate cuts in 2024, causing the US 10-year yield to spike to 4.4%, which might influence FPI flows into India in the near term.

Historical milestones of the Sensex showcase the benchmark’s climb over the years, reaching significant peaks and reflecting the Indian economy’s underlying strength and market sentiments. Starting from its touch of the four-digit figure on July 25, 1990, the Sensex has periodically set new records, with notable milestones like crossing the 5,000 mark in October 1999, breaching the 10,000 mark in February 2006, and finally reaching above 40,000 points on May 23, 2019, amid Lok Sabha Election results.

As the market continues to achieve new highs, investors and analysts alike remain watchful of varied factors, from global economic indicators and policy decisions to domestic market dynamics, that will define the course of the Indian stock market in the future.

Alexandra Bennett
Alexandra Bennett
Alexandra Bennett is a seasoned business journalist with over a decade of experience covering the global economy, finance, and corporate strategies. With a Bachelor's degree in Economics and a Master's in Business Journalism from Columbia University, Alexandra has built a reputation for her insightful analysis and ability to break down complex economic trends into understandable narratives. Prior to joining our team, she worked for major financial publications in New York and London. Alexandra specializes in mergers and acquisitions, market trends, and economic

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