The domestic equity market witnessed healthy gains on Friday, December 1, with the benchmark Nifty 50 hitting its fresh record high of 20,291.55 in the intraday session on all-round buying after India’s Q2 GDP numbers exceeded expectations.
Nifty 50 finally closed 135 points, or 0.67 per cent, higher at 20,267.90.
Mid and smallcap indices also hit their fresh record highs during the session. The Nifty Midcap 100 index hit its record high of 43,469.30 while the Nifty Smallcap 100 index scaled its fresh peak of 14,305.10.
The Nifty Midcap 100 index closed 1.10 per cent higher at 43,382.40 and the Nifty Smallcap 100 index closed 0.48 per cent higher at 14,239.30.
Sensex ended the day at 67,481.19, up 493 points, or 0.74 per cent. Sensex remained 446 points away from its all-time high of 67,927.23 which it hit on September 15 this year.
BSE Midcap index closed 0.96 per cent higher at 34,586.76 after hitting its fresh record high of 34,631.35 during the day. The BSE Smallcap index ended with a gain of 0.48 per cent at 40,565.96 after hitting its record high of 40,718.81 during the session.
The overall market capitalisation (m-cap) of the firms listed on the BSE rose to nearly ₹337.7 lakh crore from nearly ₹335.6 lakh crore in the previous session, making investors richer by about ₹2.1 lakh crore in a single session.
Below are five key factors that could have boosted the market:
1. Strong GDP numbers
India’s Q2 GDP grew 7.6 per cent, significantly exceeding the expectations. A Mint poll of 18 economists had estimated the gross domestic product (GDP) growth to be about 6.8 per cent in the quarter.
Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities observed that the sharp upside rise seen in India’s second-quarter GDP figure underlines that the economic growth has come on the back of robust domestic demand.
“Growth based on domestic demand also points to the fact that India’s economy will continue to grow in future despite the global economy slowing down. Hence, the Indian economy will also continue to attract foreign capital inflows and will carve out a different category among its emerging market (EM) peers,” said Sheth.
“Better-than-estimated India GDP numbers will raise the growth outlook for FY24 and provide cheer for the market to continue its upward momentum. The capex by the government and the pickup in manufacturing activity, led the capital goods and infra stocks to outperform,” said Vinod Nair, Head of Research at Geojit Financial Services.
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2. Market expects political stability
Exit polls of the five state elections have indicated political stability ahead of the General Election 2024. This appears to have calmed the market.
“A decisive BJP win will reinforce the consensus view that the party is on the front foot for the 2024 general elections. This will likely add a further leg of the rally to the markets as policy continuity will be viewed as a positive growth shock in the medium term,” said analysts at brokerage firm Emkay Global Securities.
3. Role of retail investors
Experts pointed out that the domestic market is witnessing a strong influx of retail investors which is supporting the market. BSE data shows the number of registered investors at BSE has crossed over 3 crore mark.
Domestic retail investors have played a crucial role in bolstering the domestic market, notably during periods when foreign investors were divesting from Indian equities. Despite foreign sell-offs, the market remained resilient, largely due to the substantial backing provided by these retail investors.
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4. Hopes of no more rate hikes
The current market sentiment suggests an anticipation of a peak in interest rates in the US, potentially leading to rate cuts around May-June next year. This shift in expectations could be a contributing factor to the resurgence of foreign portfolio investors (FPIs) in the Indian market.
After two months of selling, FPIs have resumed buying Indian equities. Data from NSDL shows FPIs have bought in Indian equities worth ₹9,001 crore in November.
5. Technical factor
According to Prashanth Tapse, Senior VP (Research), Mehta Equities, the short-term technical outlook for Nifty continues to be in favour of the bulls, with support seen at 20,089-19,909 and resistance at 20,500-20,751.
Rupak De, Senior Technical analyst at LKP Securities pointed out that the Nifty continues to ascend as the bulls maintain control. A consolidation breakout on the weekly time frame seems probable, paving the way for a further rally in the index.
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De added that the sentiment remains upbeat, marked by a bullish crossover in the weekly RSI.
“At the lower end, support stands firm at 20,200. Any declines could be seen as buying opportunities as long as Nifty holds above this level. On the higher end, resistance is anticipated around 20,450-20,500,” said De.
