1/22/2021 Sensexceptional: Sensex breaches 50,000 mark for first time - Times of India

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Sensexceptional: Sensex breaches 50,000 mark for first

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TNN | Jan 22, 2021, 01.19 AM IST

MUMBAI: On a good day on Dalal Street—which houses the headquarters

of BSE, Asia’s oldest stock exchange—one can hear talk of ‘teji’ in the
market, indicating a bullish session. On bearish days, the dominant term is
‘mandi’. Then there are those days when even seasoned players can’t
fathom the market’s trajectory and turn philosophical, saying ‘Bhav
Bhagwan Chhe’ (price is god).
Lately, more traders have been looking skyward as the sensex, the 30-
share pack that is the most popular gauge of market sentiment in India,
has gone on a record-setting spree. From a multi-year low of 25,639
points on March 24 last year, the sensex crossed the 50K mark to a
lifetime high at 50,181 points on Thursday. That’s a double vault in only 10
months.

It’s not that the sensex is new to milestones in its 41-year journey (the base year is taken as April 1, 1979) but the fact that this
‘fast fifty’ came despite a pandemic, one of the world’s strictest lockdowns, weak industrial production numbers, sliding exports
and selling by most domestic institutions is what makes it thrilling or alarming, depending on what kind of investor you are.

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1/22/2021 Sensexceptional: Sensex breaches 50,000 mark for first time - Times of India

Thanks to the 10-month rally, investors’ wealth, measured by BSE’s market capitalisation, has also been breaking the ceiling
regularly and is currently within touching distance of Rs 200 lakh crore or about $2.7 trillion, exchange data showed. Nifty on
the NSE, which is actually ahead of BSE in terms of volume and turnover, has been following a similar trajectory.

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Explained in 12 charts: How sensex breached 50,000-mark

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1/22/2021 Sensexceptional: Sensex breaches 50,000 mark for first time - Times of India

“If it (the stock market) runs at this speed, in a couple of years we will be a $5 trillion stock market, even if we lag in becoming a
$5 trillion economy by quite a distance,” a trader said, in a reference to PM Narendra Modi’s statement in mid-2019 that India
would be a $5 trillion economy by 2024.

The current market cap also makes India one of a handful of countries to have a market cap to GDP ratio of almost 1:1.
Unfortunately, that ratio is also one of the popular indicators of a highly unsustainable stock market, a theory first propagated
by billionaire investor Warren Buffet and followed by many others to decide whether to buy or sell a market. On the valuations
front too, the sensex is at an all-time high price-to-earnings ratio of 34.4, compared to its 10-year average of 21.8. This ratio in
essence indicates the amount in rupees an investor is willing to pay for every rupee of a company’s earnings.

Foreign funds, however, do not seem to be worried either by the Buffet indicator or the all-time high PE ratio. They have been
pumping in a record amount of money into the domestic market. Since October, foreign portfolio investors (FPIs) have net
pumped in over Rs 1.6 lakh crore, or about $21.2 billion, making India the largest recipient of foreign funds among emerging
markets. In comparison, mutual funds have been selling stocks aggressively with the net outflow at nearly Rs 75,400 crore,
official data showed.

According to Shiv Sehgal, president—institutional client group, Edelweiss Securities—a combination of global and domestic
factors has led to this rush for Indian stocks among foreign fund managers. “Across the world, the news of Covid-19 vaccines
and a Democratic victory in the US augur well for global reflation. On the domestic front as well, the absence of a second wave
and a strong bounceback in pent up demand have given a fillip to high frequency indicators like GST collections, imports, PMI,
etc,” Sehgal said.

In addition, he feels that surprise earnings by India Inc are prompting analysts to up price targets for leading stocks. Corporate
earnings have bounced back despite weak demand, which in turn is giving confidence to investors that stock prices will sustain
once demand revives. Lastly, “domestic financial conditions have been kept quite benign by the RBI. After all, this is a
necessary if not sufficient condition to revive risk sentiments,” Sehgal said. “Given the high foreign ownership (of Indian
companies), risk on sentiments aid India disproportionately.”

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1/22/2021 Sensexceptional: Sensex breaches 50,000 mark for first time - Times of India

The nearly 10-month old rally has been mostly led by a handful of stocks that include Infosys, Reliance Industries, TCS, HDFC
Bank and HDFC. In the earlier part of the rally while RIL, some banks and financials lifted the sensex, IT soon took over the lead
and then pharma joined in.

The rally in RIL was backed by a record foreign fund infusion in its telecom and retail subsidiaries. The strong buying in IT,
banks and pharma stocks emerged after investors realised that as people remained confined to their homes due to Covid-
induced issues, the demand for technology-driven solutions, healthcare and finance was increasing. As sector leaders were
able to rise to the new challenges and meet those demands, their stock prices also galloped, market players said.

In Thursday’s market, the sensex started the session at 50,097 points, scaled a new life-high at 50,184 points and after a late
sell-off that shaved off over 800 points from the day’s high, closed at 49,625, down 167 points on the day. Selling in HDFC
Bank, HDFC and Bharti Airtel contributed the most to the day’s selling while buying in RIL, Bajaj Finance and Bajaj Auto
cushioned the slide to a large extent.

On the NSE, the nifty too rose to a new life high at 14,754 points but closed lower at 14,590 points, down 54 points on the day.

Technically, the indices are at crucial levels. On daily charts, the nifty and sensex are showing formations which suggest “high
chances of quick intraday correction”, Shrikant Chouhan, EVP—equity technical research, Kotak Securities—wrote in a note. At
a nifty level of below 14,750, correction could continue till 14,550-14,500, while on the up side, 14,750 would be the immediate
hurdle for the bulls, Chouhan said.

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