Sensex breaches 45,000 for first time on foreign fund flows

MUMBAI: The global liquidity deluge that has been taking stock indices around the world to new highs lifted the sensex on Friday above the 45,000 mark for the first time in its history as foreign funds continued to pour money into the domestic market. The sensex went past the milestone in opening trades and, after briefly dipping below that level, rallied to end 447 points higher at 45,080 — a record closing level.
The day’s rally lifted investors’ wealth to a record level too, with the BSE’s market capitalisation now at Rs 179 lakh crore. Friday’s gains came on the back of the RBI’s dovish policy statement, although the central bank kept the interest rate steady and hiked its estimated rate of inflation. The rally was also helped by global factors. End-ofthe-session BSE data showed that foreign funds had a net buying of Rs 2,970 crore.

According to HDFC Securities head (retail research) Deepak Jasani, Asian shares scaled a record on Friday on growing prospects of a large US economic stimulus package. “European markets edged slightly higher too on Friday as investors monitor prospects of a US stimulus package and a last-minute Brexit trade deal. The MSCI’s emerging market currency index stood at 2 1/2-year high, having gained more than 10% from its March trough,” Jasani wrote in a post-market note.
In the medium term, a host of global and local factors helped the sensex recover from a multi-year low at 25,640 points on March 24 this year (just when the Covid-induced pandemic started spreading in the country) to Friday’s record close.

These factors also attracted a record amount of foreign money into the country in November. FPI inflows stood at Rs 62,782 crore for November, a finance ministry release noted. That is three times the Rs 22,490-crore figure clocked in the year-ago period. The strong buying by foreign funds more than offset the Rs 31,500-crore net selling by mutual funds, official data showed.

On the global front, the US Presidential election verdict and positive news flows with respect to Covid vaccine development led to global risk assets rallying over the past month, a note from SBI Mutual Fund said. “Positive data with respect to vaccine development remained the key trigger as markets started to price in an earlier resumption of normal economic activity,” the note said.
Domestically, a large number of leading companies showed strong growth during the July-September quarter, though a large part of this growth came from cutting costs drastically. A sharp 23.9% economic contraction during the April-June quarter and then a better-than-expected 7.5% de-growth in the last quarter also lifted investor sentiment on Dalal Street, market players said. Estimates by several top analysts and brokers that the Indian economy could show a low double-digit growth in fiscal 2022, after a single-digit fall in fiscal 2021, enthused investors.
In future, the rate of recovery of the Indian economy is expected to take the market higher. “The Indian growth story continues to expand as is demonstrated by the trends in FPI, FDI and corporate bond market flows that indicate and underline the beliefs of investors in the strength and resilience of Indian economy,” the finance ministry note said. “Investment sentiment in the Indian economy has been buoyed by the frequent and active intervention of the government despite being hit by a worldwide pandemic,” it said.

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