Markets: Expecting a Modi government return, Sensex up at 75,000k-plus, Nifty50 crosses 22,900

Virendra Pandit

New Delhi: A day after the Reserve Bank of India (RBI), unlike many struggling central banks wordwise, announced a dividend (surplus) of Rs. 2.1 trillion to the Centre, the country’s stock markets reacted positively with Sensex and Nifty50 hitting record closing highs of 75.418 and 22,967, respectively, on the back of strong gains in banks and select index heavyweights.

Prime Minister Narendra Modi had, in a recent media interview, while saying that Sensex has zoomed three times to 75,000 from 25,000 in 2014 when he came to power, predicted the benchmark indices could go up further after his third term begins next month.

On Thursday, equity benchmark stock indices the S&P Sensex and Nifty50 rallied more than 1.6 percent to close at lifetime high levels following buying in banking, oil, and auto shares and a record dividend payout by the RBI to the government.

Regaining the 75,000 level after its best single-day gain since January 29, the 30-share BSE Sensex closed at an all-time peak of 75,418.04, up by 1,196.98 points or 1.61 percent over the last close. During the day, it zoomed 1,278.85 points or 1.72 percent to reach its all-time intra-day high of 75,499.91.

The NSE Nifty inched closer to the record 23,000 mark during the day. It went up by 369.85 points or 1.64 percent to 22,967.65. It jumped 395.8 points or 1.75 percent to 22,993.60 — its intra-day record peak.

Among the Sensex heavyweights, Larsen & Toubro, HDFC Bank, ICICI Bank, and Reliance contributed almost 50 percent of the day’s gain so far.
The NSE Nifty50 index hit a new all-time high of 22,993.60 and settled 370 points higher at 22,968.
The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued large-caps.

The Nifty Midcap index too posted a record high at 19,568 in trades. The Nifty SmallCap index quoted around 15,920; it was 50-odd points shy from its peak of 15,973.

Shares of public sector banks (PSBs), in particular, remained in focus, rallying up to 3 percent a day after the Reserve Bank of India (RBI) announced a dividend payment of Rs 2.1 trillion for FY25.

This development is a significant macroeconomic positive for the market, with direct implications for the fiscal deficit and bond yields.
The infusion of funds is akin to an indirect rate cut for the economy, as it is expected to lead to a reduction in bond yields. Since many investment instruments are linked to government bond yields, this reduction might have a broad positive impact across the financial markets. The improved fiscal position could also prompt upgrades in India’s economic outlook, the analyst said.

The Nifty PSU Bank index was the top gainer, up nearly 2 percent. Union Bank of India, Bank of Baroda, and Bank of India were the top gainers. India’s largest state-run bank, SBI stock was up 1.5 percent.

Analysts at foreign brokerage Bernstein see a higher probability of the BJP government winning around 330-350 seats in the Lok Sabha on June 4, thus driving some rally in the markets post-election results. They expect the Nifty50 index to scale past the 23,000 mark.

The Nifty index may witness further expansion. An immediate target of 23,000 is achievable, with the possibility of reaching 24,000 as the election outcome approaches early next month. However, while large-cap stocks are expected to perform well, mid-cap and small-cap stocks may underperform from this point forward, analysts said.

Over the last few trading days, barring May 21, selling by foreign institutional investors has slowed down. The FIIs have net sold stocks to the tune of Rs 1,813 crore in the last five trading days as against net sales of Rs 38,186 crore so far in May.

The US-10-year yield has eased to 4.43 percent from a high of 4.73 percent a month ago. Traders are expecting at least two rate cuts in the calendar year 2024.

Meanwhile, the 10-year bond yield in India was seen quoting around 7 percent as against the 52-week high of 7.395 percent.