Bulls extend record run: 1,000 points in 10 sessions

MUMBAI: Indian benchmark indices extended their record-breaking run with Sensex breaching the 38,000-mark on Thursday for the first time as investors shrugged off concerns over the impact of escalating trade dispute between the US and China on the global economy. Bank shares such as ICICI, Axis and SBI led gains on expectation that the bad loan cycle has peaked.

The Sensex ended up 136.81 points, or 0.4%, at 38,024.37 after hitting an all-time high of 38,076.23 during the day. The Nifty ended up 20.7 points, or 0.2%, at 11,470.70, after scaling a record high of 11,495.20 in Thursdays session.

The indices have hit record highs in 15 out of the last 21 sessions. The 1,000-point rally from 37,000-level to 38,000-level took just 10 sessions, and it is among the fastest 1,000-point journeys for the 30-stock index. The Nifty fell just shy of breaching the 11,500-mark.

Sensex and Nifty have managed to notch up only modest gains on most of the last three weeks. The average gain for the Sensex was 0.28% in the last 10 trading days. ICICI Bank surged the most in six months after the lender said it has made full disclosures about its bad loans in its annual report, investor presentations and analysts calls. The stock gained 4.6% to Rs 332.95. Axis Bank gained 3.8% and SBI rose 2.5% on Thursday.

The Nifty Bank index hit record high, ending up 0.9% to 28320. Among other gainers on the index, Vedanta, Power Grid Corporation of India and NTPC advanced 1.4-3.9%. Analysts said investors are shifting to stocks that have not rallied so far. “Earlier the rally was led by expensive stocks such as private retail banks, consumer staple and IT stocks, which became even more expensive on valuations. Now, we are starting to see other banks, which have shown positive trends in terms of their numbers such as NPLs (non performing loans) and provisions and likely RoA (return on assets) trajectory, starting to rally,” said Sanjeev Prasad, Co-Head, Kotak Institutional Equities.

Best performing Asian market
Prasad said these banking stocks were undervalued and there is increased expectation that the NPL cycle is finally getting over in terms of recognition and resolution under the Insolvency and Bankruptcy Code process. This has led to investors taking a positive call on some of the corporate lenders with high NPLs, said Prasad.

Foreign portfolio investors net bought shares worth Rs 370.68 crore on Thursday while domestic institutional investors net sold shares worth Rs 85.39 crore, provisional data showed.

FPIs have been net sellers in only one out of the six trading sessions so far in August, and are net buyers of Rs 869 crore worth of shares during the period. DIIs are net sellers so far in August, of Rs 971.95 crore.

The BSE MidCap index rose 0.6% to 16,340.88 and SmallCap index gained 0.3% to 16,916.85. The Sensex had hit its 2018 low of 32,483.84 on March 23 while Niftys low of 9,951.90 was also on the same day. From those levels, the markets have overcome various concerns such as weakening macro-economic scenario, political uncertainty and US-China tariff war primarily on the back of gains in select heavyweights such as HDFC Bank, TCS.

The Sensex and Nifty have gained 11.6% and 8.9%, respectively, so far in calendar year 2018, holding its place as the best performing Asian market this year. It also holds the place of an expensive market with valuations at 18.39 times on a one-year forward earnings basis compared to MSCI Emerging Market Indexs 12.15 times.

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