Sensex hits all-time high: Here’s why

NEW DELHI: The bull run in markets continued on Thursday with the benchmark BSE sensex scaling all-time high in intra-day trade amid massive foreign fund inflow. The 30-share index logged fresh record intra-day high — at 40,392 — by rising 340 points; while the broader NSE Nifty stood comfortably above the 11,900-mark.

Sensex, which is currently on a gaining spree, had logged the highest ever closing — 40,268 — on June 3. Both domestic and global cues also helped the indices to maintain the surge.

Major gainer in the sensex pack include Infosys, State Bank of India (SBI), Tata Motors, Sun Pharma, Bajaj Finance, HCL Tech and Bajaj Finance with their stocks surging as much as 4.63 per cent. On NSE, except for Nifty FMCG (fast-moving consumer goods), all other sub-indices were trading in green with Nifty Media and PSU Bank leading the pack, up as much as 2.94 per cent.

Here are the top reasons supporting the upward movement:

* Continuous buying by FIIs: Foreign institutional investors (FIIs) purchased a whopping Rs 7,192.42 crore in the capital market, on Wednesday, while domestic institutional investors sold shares worth Rs 185.87 crore, data available with stock exchange showed.

Although most of the buyers and the sellers were foreign entities, the stake that was offloaded by the seller was in the nature of foreign direct investment (FDI), while the buying was classified as foreign portfolio investment, and hence the skewed net inflow figure.

* Tax cut buzz: Investment sentiment got a boost on rumours that the government is looking at another reduction in tax rates. The government has already slashed corporation tax rate to 15 per cent for new companies in the month of September.

This had set off speculation about a reduction in personal income tax. Sensex scaled the 40,000 peak again after nearly five months.

* US Fed rate cut: The Federal Reserve on Wednesday cut interest rates for the third time this year to help sustain US growth despite a slowdown in other parts of the world, but signaled no further reductions ahead unless the economy takes a turn for the worse.

“We believe that monetary policy is in a good place,” Fed chair Jerome Powell said in a news conference after the US central bank announced its decision to cut its key overnight lending rate by a quarter of a percentage point to a target range of between 1.50 per cent and 1.75 per cent.

* US-China trade hopes: Investors have also bet on a possible trade truce between the world’s two major economies — the United States and China — driving global equities higher.

Powell and other Fed bankers are optimistic that the United States and China will sign a preliminary agreement, calling a truce to their 16-month trade war.

“We have that Phase One potential agreement with China which, if signed and put into effect, could have the effect of reducing trade tensions and reducing uncertainty,” Powell said. “That would bode well for business confidence and perhaps activity over time.”

* Corporate results: Indices have seen steady gains in the last few sessions buoyed by positive global cues, a better-than-expected set of corporate results and hopes of a strong December quarter.

“Sentiments have turned recently, most results are decent and there have not been any disappointments so far,” Siddhartha Khemka, head of retail research at Motilal Oswal Securities, told news agency Reuters.

(With agency inputs)

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