Equity markets post smart gains; Sensex rises 408 points, Nifty up by 107.7 points

The Sensex was up by 408.68 points or 1.12% to close at 36,737.69. The Sensex was up by 408.68 points or 1.12% to close at 36,737.69.

After a day’s breather, the equity markets posted smart gains on Thursday as investors chose to focus on the earnings season that kickstarted on Thursday and were supported by positive global cues. The Sensex was up by 408.68 points or 1.12% to close at 36,737.69. The Nifty was up by 107.7 points or 1.01% to close at 10,813.45.

Foreign portfolio investors (FPIs) have been sellers so far in July. Till July 8, the FPI outflow was at $342.6 million in total. According to provisional data on the exchanges on Wednesday, FPIs sold stocks worth $132.64 million whereas domestic institutional investors sold stocks worth $112.2 million.

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Sorbh Gupta, associate fund manager, Quantum Mutual Fund, said: “The markets have risen because liquidity is there, the markets are behaving as though growth will come back, but interest rates will continue to remain low. The low interest rates and growth cannot go hand in hand for long.”

The Nifty touched the high point of 10,836 but closed the session a little lower. The benchmark did not break the 200 day moving average of 10,880. The stock markets rose, helped by global cues but also because of the beginning of the earnings season. Most market participants, however, expect Q1 earnings to be subdued. Kotak Institutional Equities said it expects the earnings of the stocks in its universe to decline by 41% year on year (yoy). “We expect net profits of the KIE coverage universe to decline 46% yoy (decline 61% yoy excluding banks/diversified financials) in 1QFY21 as economic activity declined sharply due to the Covid-19 outbreak and subsequent lockdown for a good part of the quarter,” said the brokerage.

The market saw strong volumes of the weekly options expiry with the futures and options segment witnessing turnover worth Rs 32.57 lakh crore against the six month average of Rs 14.49 lakh crore.

According to a report by Jefferies, the valuations in the Indian market are currently stretched and they are currently at the pre- global financial crisis peak. “With Nifty up 41% from March 23 lows, and Nifty earnings per share (EPS) downgrades unrelenting (Fiscal year 21 Nifty EPS cut by 24% since then); the one year forward multiples on PE basis appear stretched.

Nifty trades at 19.7 times on consensus earnings; valuations are now same as at the January 2008 peak,” said Jefferies.

The biggest gainers on Nifty were Hindalco, HDFC, State Bank of India, Bajaj Finance, and Tata Steel, up by 6.58%, 4.26%, 4.14%, 3.81%, and 3.23%. The biggest losers on the Nifty were Bharti Infratel, Coal India, Tech Mahindra, ONGC and Hero Motocorp, down by 1.94%, 1.54%, 1.2%, 0.98% and 0.85%. Sectorally, the biggest gainer was Nifty Metal, followed by Nifty Financial Service, Nifty Bank, Nifty PSU Bank, and Nifty Private Bank.

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