Benchmark indices logged fresh all-time highs on Thursday amid positive sentiment across the global markets on hopes the US Federal Reserve would maintain its easy monetary stance amid not so encouraging signs of economic recovery.
The BSE Sensex rose 514 points, or 0.9 per cent, to end at 57,852, while the Nifty rose 158 points, or 0.92 per cent, to finish at 17,234. Both indices added nearly 9 per cent each in August, their best monthly showing since November.
The latest increase was boosted by gains in index heavyweights Tata Consultancy Services (TCS), Hindustan Unilever (HUL), and Reliance Industries (RIL)—the three stocks accounted for nearly half of the Sensex’s gains. TCS rose 3.34 per cent to end at an all-time high of Rs 3,838, HUL rose 2.5 per cent to end at a new record of Rs 2,800, and RIL gained over a per cent to end at Rs 2,294, its highest close since October 2020.
Foreign portfolio investors (FPIs) have emerged as strong buyers this week, buoyed by the US Fed Chairman Jerome Powell’s dovish comments at the central bank’s annual Jackson Hole conference over the weekend. Powell indicated that the US Fed is likely to begin tapering bond purchases before the end of the year but was in no rush to hike interest rates.
The 10-year US Treasury yields declines to 1.3 per cent and the dollar weakened against major global currencies after Powell’s comments.
On Thursday, FPIs bought shares worth Rs 349 crore, taking their month-to-date buying tally past Rs 6,000 crore.
“Domestic indices nudged higher tracking cues from positive economic data, FPI buying and mixed global markets ahead of the release of US jobs data. Economic data is nudging the performance of core sectors like capital goods and industrials, while the recent high performance of the market is also tempting investors to shift to safer defensive sectors,” said Vinod Nair, head of research at Geojit Financial Services.
Investors are hoping that the US Fed will not be in a hurry to raise rates as the US’ economic growth was beginning to slow.
“Going ahead, the market is likely to continue with its positive momentum as economic recovery and vaccination drive both continue their northward journey. Globally, investors are awaiting US non-farm payroll data due on Friday, especially post US Fed’s stress on recovery in the labour market in its tapering decision. Though the long-term trend is positive, one cannot ignore bouts of volatility, given risk of third wave of pandemic, commodity-linked inflation, high earnings growth expectation leading to rich valuation,” said Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services.
Experts said investors are trying to assess when the delta variant outbreak might peak and how that will play into the timing of the US Fed’s taper plans.
Most global stocks are near record levels and gauges of implied financial market volatility are declining, suggesting many remain optimistic that the reopening from the health crisis will weather challenges.
A total of 1,942 stocks advanced, while 1,245 declined on the BSE, indicating that the gains are getting more broad-based.