In 6 months, Indian stock market gained $1 trillion in value

MUMBAI: The fifth-largest equity market in the world, India has added more than $1 trillion to its market capitalisation (mcap) over the last six months with the domestic equity benchmarks, Sensex and Nifty 50, reaching fresh record highs over robust macroeconomic indicators and bullish investors' sentiments.

The NSE benchmark Nifty 50 has hit record highs in eight out of 11 sessions. Nifty 50  gained about 6% in June, helped by policy continuity after the Lok Sabha election results, forecasts for better economic growth, and the return of foreign inflows. Additionally, Nifty 50 is headed for an unprecedented ninth straight year of gains. The shares of smaller and mid-sized companies have also been rallying and outperformed their large-cap peers.

"The domestic market hit a new peak, bolstered by a rally in large-cap stocks, where the valuation is relatively fair. In contrast, mid- and small-cap stocks saw profit-taking due to valuation concerns,'' said Vinod Nair, head of research, Geojit Financial Services.

‘’Currently, the financials and consumption stocks are catching up driven by improved balance sheets, a strong GDP growth forecast, and softening inflation. Global market sentiments reflected similar trends, with a consensus on imminent rate cuts,'' added Mr. Nair.

What's fuelling the rally in the market?

Rally in heavyweights: According to Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management, "Earnings-wise, large-cap conglomerates like Reliance, most of the public sector banks and large private banks are solid. Institutional money is chasing these segments.''

Reliance Industries, which has the second-highest weightage on the Nifty, rose 4.1 percent to hit an all-time high. It has risen about two percent this fiscal year, less than the Nifty's seven percent increase.

‘’Our sense is that the recent buoyancy in shares is also supported by the return of FII (foreign institutional investors)  buying in the domestic market," said Parth Shah, research analyst, StoxBox. Apart from ticking all the right boxes on the fundamental side, investors are becoming increasingly confident of its new energy business and also expect a strong performance from the retail business going ahead,'' added Shah.

Return of foreign inflows: The sharp bounce back in Nifty by 7.5 percent from the June 4 lows indicates that the undercurrent of this market is bullish. The sentiment has prompted buying by foreign investors but the exuberant retail investors are likely to buy every dip since the ‘buy on dip strategy’ has worked very well in this bull market.

A positive news from the market perspective is the current account turning surplus in quarter 4 in  FY24. This will take away the pressure on the rupee and pave the way for FII inflows when clarity emerges on the US Fed rate cuts.

Strong macro fundamentals: Analysts say that the overall optimism surrounding the Union Budget in July, increasing foreign inflows, and robust domestic economic data contributed towards the positive movement in the market. They expect the ongoing uptrend to continue further.

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