Indices scale new highs on short covering, RBI dividend

Benchmark indices closed at record highs on Thursday amid short covering by overseas investors, buying in banking, oil and auto shares, and a record dividend payout by the RBI to the government.

The Sensex closed at all-time peak of 75,418, up by 1,196 points or 1.61 per cent over the last close. Market-cap of BSE- and NSE-listed companies crossed $5 trillion making India the fifth country to reach this milestone. For NSE, the latest $1 trillion addition took about six months. The Nifty rose 1.64 per cent to 22,967 on Thursday, the most in percentage terms in almost six months.

Top gainers

Adani Enterprises and Adani Ports were the top gainers, up 7.8 per cent and 4.7 per cent, respectively. All sectors ended in green, baring Pharma & Healthcare. Auto, Banking, Financials and IT were among the top gainers. Auto, NBFC and FMCG stocks gained after the RBI reported rising rural consumption for the first time in two years.

Vinod Nair, Head of Research, Geojit Financial Services, said, “The RBI’s record dividend is akin to an indirect rate cut, and is expected to reduce bond yields. The broader market remained buoyant, aided by the composite HSBC PMI data for May, which indicated strong expansion. Early onset of southwest monsoon has provided a boost to the domestic market, which was underperforming in the last two months to other emerging markets.”

FPIs bought shares worth ₹4,670 crore on Thursday, provisional data showed, even as buying by domestic institutions remained muted. FPIs have been offloading shares at a brisk pace this month, with net sales of over ₹33,000 crore in the secondary market.

Soni Patnaik, Assistant Vice President, Equity Derivatives Research, JM Financial Services, attributed the rally to shorts getting squeezed out of the system as Nifty futures saw 2.5 per cent fresh longs getting added intraday. Aggressive put options writing could be seen from 22500 PE to 22800 PE forming strong support base at 22600/22700 levels.

May reach new highs

Neeraj Chadawar, Head of Fundamental and Quantitative Research at Axis Securities, said Nifty could reach new highs in the first week of June if the election outcome aligns with current market expectations. “We recommend that investors stay invested in the market and maintain good liquidity (10 per cent) to take advantage of market dips and gradually build positions in high-quality companies with strong earnings visibility with an investment horizon of 12-18 months.”

Global stocks traded mixed on Thursday amid military drills around Taiwan. Fed minutes showed that policymakers appear inclined to maintain the benchmark rate in the 5.25-5.50 per cent range until September. President Joe Biden’s administration said new tariffs on about $18 billion worth of Chinese imports would be imposed from August 1 targeted at key upcoming Chinese sectors, including electric vehicles and semiconductors.

Strong forecasts from Nvidia lifted global chipmakers, while surveys pointing to improving business activity in the Eurozone prompted traders to scale back bets of interest rate cuts this year.

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