The S&P CNX Nifty crossed the 13,000 levels for the first time ever and made record highs today. Sensex also rose to a new life time high. Indian indices opened on record-high levels on Tuesday, tracking gains in Asian peers, on the back of the progress made on the COVID-19 vaccine and the prospects for a speedy global economic revival. Here are three reasons why the Nifty hit a record high, according to a report from Broking firm Motilal Oswal.
Foreign Portfolio Inflows have made highest monthly buying in Nov 2020 in the last 2 decades. Till date they have pumped in approx. 50,989cr. in Nov itself and have invested approx. 1.31Lcr in India year to date. This has helped the indices touch the 13,000 levels. The inflow increased considerably especially after the end of the election in the United States and weakness in the dollar index. Another major reason behind such a large inflow was the expected stimulus worth trillions of dollars from central banks to revive economies that are hit hard by the COVID-led lockdown.
Another factor that has contributed to the new highs is the blockbuster performance of corporates in 2QFY21. Few sectors where we have seen significant amount of growth are IT, Pharma, Metals, select Pvt Banks and NBFCs, Cement. Commentaries of banks suggest there was an improvement in growth and asset quality. The asset quality outlook is much better than initially feared as collection efficiency picked up sharply in 2QFY21. Gradual unlocking and the normalization of supply chain issues for most Auto OEMs led to volume recovery to meet underlying demand and inventory refilling. Cement demand recovery was attributable to strong rural and semi-urban demand and a pickup in government infra and road projects from September.
Robust rural demand to push economic growth
Rural demand continued to outperform urban in 2QFY21, enabling sequential recovery for most companies in the Consumer sector. Commentaries of NBFCs suggest improving macros across most business segments and the end of the moratorium have led to increased optimism for collection efficiency (CE) as well as growth across product segments. Companies have highlighted that domestic steel demand has improved significantly in 3QFY21. OMCs stated that with the lifting of lockdown restrictions worldwide, demand is once again seeing an uptick. The Retail sector saw a gradual recovery in sales as economic activity continued to pick up, with 75-95% of retail stores operational in 2QFY21. Supply-side issues were largely contained in 1QFY21, and demand normalization was seen across segments in 2QFY21. All in all there has been a significant revival across sectors due to overall economic revival.