Market surge: Hold ‘balance and nerves’

The Met department’s prediction of an above-normal monsoon in July, after the below-normal rainfall in June, has not only uplifted the common man and farmers but also cheered up the Indian stock market. It was raining moolah in the trading platforms.

There has been a bull rampage in the market, making the bears go into statue mode for the time being and letting the Sensex and Nifty reach record levels.

In recent months, India’s stock market has witnessed an impressive rally, with both the BSE Sensex and Nifty consistently hitting lifetime highs. Several reasons contribute to this surge, including strong foreign investor inflows, the revival of the monsoon, strong GDP growth and a low inflation rate.

One intriguing point to note is that during the Indian election campaign, there were repeated reports about foreign investor outflows, and some analysts attributed this to election result outcome jitters. Well, the elections have come and gone, and the same old NDA government is back in the saddle, with no signs of that jittery feeling.

There is a bullish fever in the market. This week ended the trading sessions with the Sensex conquering Mount 80K on July 3, driven by its fastest-ever 10K point rally in just 58 sessions, indicating that the pre-budget rally is going strong.

Nifty too made fresh gains to cross the 24K mark. The last 15 days of June appear to be the turning point for beating market volatility. According to National Securities Depository (NSDL) data, from June 16 to June 30, foreign investors were buyers of Indian equities worth Rs 34,027 crore across 17 sectors, renewing buying in auto and IT while booking profits in power, metals and FMCG.

Sectors such as telecommunications and consumer services continued to receive robust foreign inflows worth Rs 6,208 crore and Rs 3,097 crore respectively after receiving inflows worth more than Rs 1,500 crore in the first half of June. Similarly, sectors such as automobiles, information technology, construction materials, oil and gas and consumer durables saw renewed confidence among foreign investors. 

Going by the sheer speed of the market rally, it appears that “achche din” for markets have arrived. Having scaled Mount 80K, is the market looking at capturing Mount 100K? Some analysts think so. According to Bloomberg Surveys, it is expected that PM Modi’s budget, to be presented by FM Nirmala Sitharaman in the third week of this month, will send India’s soaring stocks even higher.

The survey finds India’s $5 trillion stock market could gain up to 20% this year, driven by government spending and strong corporate earnings. Budget 2024 is expected to boost consumer spending and infrastructure, benefiting businesses.

It will be positive for sectors related to affordable housing, capex plays, consumer and rate-sensitive businesses, according to respondents of the survey. But every cheerful moment comes with worrisome factors. The first alert was sounded by Securities Exchange Board of India chief Madhabi Puri Buch when she made a call to action.

She has urged industry stakeholders to proactively report any malpractices within their sectors. Buch says it is important to maintain investor trust, a cornerstone for a growing market. Amid the recent stock surge, Sebi has already implemented stricter measures to ensure market integrity.

Surprisingly, the Chief Justice of India DY Chandrachud on Thursday emphasised the importance of market regulator Sebi and its appellate body, the Securities Appellate Tribunal.

Referring to newspaper articles calling the crossing of the 80,000 points milestone by the BSE an ecstatic moment, where India is entering a "stratospheric domain," the CJI pointed out that such events emphasise the need for regulatory authorities to ensure that everyone holds their "balance and nerves" amid the wins.