The Indian stock market saw a spectacular rally on Thursday (May 23). Both the benchmark indices, BSE Sensex and NSE Nifty 50, hit fresh life highs.
During the day, the 30-share Sensex jumped nearly 2 per cent and touch a fresh life high of 75,499.91. The broader Nifty 50 index also rallied almost 2 per cent to hit a record-high of 22,993.60 points.
Sensex closed at 75,418.04, up 1,196.98 points or 1.61 per cent, on Thursday, while Nifty ended at 22,967.65, up 369.85 points or 1.64 per cent.
5 reasons why India stock market touched a record high
1 - Sensex and Nifty surged to a record high after the Reserve Bank of India (RBI) announced a bumper Rs 2.11 lakh crore dividend to the Government of India for fiscal year 2023-24. The news is significant for the market as it has got direct implications for the fiscal deficit and bond yields. There is an optimism among investors, who see the infusion of funds would possibly lead to a possible rate cut as it is like to lead to a reduction in bond yields.
Also Read: Indian govt to get record Rs 2.11 lakh crore dividend from RBI: All you need to know
2 - The stock market is also getting fillip from positive sentiments among investors who see political stability after 2024 Lok Sabha elections result. They are now preferring on buying quality stocks, as the medium—to long-term outlook of the market remains positive. “The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued largecaps,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
3 - Domestic institutional investors (DIIs) are also strongly buying in the Indian market even as foreign institutional investors (FIIs) have been offloading Indian equities this month. As per data, DIIs bought Indian stocks worth Rs 38,331 crore in the cash segment until May 22, while FIIs sold stocks worth Rs 38,186 crore in cash so far this month.
4 - Experts say the market is experiencing a short-covering rally that appears to have further momentum. They see FIIs shifting to buying, which would provide additional support to the market.
5 - Banking stocks performed especially well. The BSE Bankex index rallied nearly 2 per cent, led by shares of Axis Bank, AU Small Finance Bank, and IndusInd Bank. The record Rs 2.11 lakh crores dividend from the RBI to the government, which will give an additional 0.3 per cent of GDP fiscal room for the government. This means the government can reduce its fiscal deficit and step up infrastructure spending. There has been a sharp decline in bond yields, an indication of lower borrowing by the government. Decline in bond yields is positive for banking stocks, according to Dr Vijayakumar.
Larsen & Toubro, Maruti, Mahindra & Mahindra, Axis Bank, IndusInd Bank, HDFC Bank, Bajaj Finserv, State Bank of India and Reliance Industries were the major gainers in Sensex.
According to Santosh Meena, Head of Research at Swastika Investmart, the Nifty index may witness further expansion. An immediate target of 23,000 is in sight, with the possibility of reaching 24,000 as the election outcome approaches.
“However, while large-cap stocks are expected to perform well, mid-cap and small-cap stocks may underperform from this point forward,” Meena added.
With inputs from agencies
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