Share Market: Indian stock market is witnessing a stormy rise this month. In the last one month, Sensex has reached around eight percent. Whereas, Nifty has jumped 19.49 percent. On Wednesday, the Sensex closed beyond the 72,000 mark for the first time. Whereas, Nifty closed at its all-time high of 21,654.75 points with a jump of 213.40 points. The total market capitalization of BSE-listed companies is now close to ₹361.3 lakh crore. In such a situation, the question arises why the Indian stock market has been in a bullish trend for so long.
rate cut expected
Since US inflation has been declining for some time now, market participants have been aggressively buying stocks on expectations that the US Federal Reserve will start cutting interest rates as early as March next year. According to the CME FedWatch tool, market pricing now shows a more than 80 percent chance that the Fed could start cutting rates next March, with prices falling by more than 150 basis points for all of 2024, Mint reports. . When interest rates fall, more money flows into the financial system. This could potentially help companies earn more profits which would boost market sentiment.
7 percent growth rate expected
The outlook of the Indian economy is strong. According to an ANI report, Fitch Ratings expects India to be one of the fastest growing countries in the world with a resilient GDP growth of 6.5 percent in 2024-25. For the current financial year 2023-24, this GDP growth rate is estimated at 6.9 percent. Economists suggest that after expanding by 7.7 percent in the April to September period this year, the economy is expected to maintain growth at a comparable pace in the coming quarters. According to D.K. Srivastava, Chief Policy Advisor, EY, the Indian economy is expected to see a growth of 7 percent in the January to December period of 2024. However, growth is expected to be at least between 6.5-7 percent in FY 2025.
Strong FPI buying
Foreign investors have been aggressively investing money in the Indian financial market since November this year. NSDL data shows that after investing about ₹24,546 crore in November, FPIs have invested about ₹78,903 crore in the Indian financial market so far in December (till December 26). Increased buying activity by foreign portfolio investors (FPIs) could be linked to India’s strong economic growth prospects as well as expectations of interest rate cuts, decline in the US dollar and bond yields.
Number of retail investors increased by 27 percent
Analysts have highlighted that the growing population of retail investors in India has significantly contributed to the resilience of the domestic market, countering the selling pressure from foreign investors seen before November. BSE data shows that the number of retail investors has increased by more than 27 percent year-on-year, while on a monthly basis the number of retail investors has increased by about 3 percent. Yogesh Patil, Chief Investment Officer – Equity, LIC Mutual Fund, told Mint in an interview that participation of retail investors has emerged as a strong force in the domestic markets and volatility has reduced. Especially at a time when foreign institutional investors decided to cash in. As our economy expands and income levels rise, more investors are likely to invest in equities.
money going into large caps
Experts emphasize that after huge gains in mid- and small-caps, investors’ money is now going into large-caps due to valuation convenience. There is an uproar in the mid and small cap segments, where valuations are very high. VK Vijayakumar, chief investment strategist, Geojit Financial Services, said investors should prefer high-quality bluechips that are performing well and have good earning potential.