Markets Near Record Highs: New Milestones Ahead?

Indian equities extended their winning streak from the previous fortnight, buoyed by continued investor optimism. Benchmark indices, the BSE Sensex and Nifty 50, surged nearly 2 per cent each during the period, supported primarily by sustained strength in Large-Cap stocks. However, the rally was largely concentrated at the top, with limited participation from the broader market. The BSE Mid-Cap Index and BSE Small-Cap Index managed modest gains of 0.50 per cent and 0.26 per cent, respectively.[EasyDNNnews:PaidContentStart]

The muted performance of mid and small-cap segments reflected a phase of consolidation after their sharp run up earlier in the year, coupled with investors turning selective amid stretched valuations and an ongoing shift towards quality and liquidity in large-cap names. On the sectoral front, while all indices ended in the green, most posted modest gains. The real standouts were Real Estate, FMCG and Banking stocks. The market was receiving positive cues: a weaker dollar, expectations of global-interestrate easing, and improved risk appetite.

The Reserve Bank of India’s (RBI) large-scale dollar sales strengthened the rupee, which was perceived as a stability signal aiding sectors like real estate. In addition, the real estate sector is benefiting from favourable underlying demand, increasing transaction values and structural tailwinds. With some sectors facing global headwinds, investors gravitated towards relatively stable, large-cap FMCG names viewed as safe-bets, pushing stocks such as Hindustan Unilever and Nestle India higher. The GST realignment and rationalisation of Tax rates on everyday essentials created a positive sentiment for consumer staples.

The fortnight painted a mixed picture as volatility spiked, FIIs made a comeback, and while the rally held firm, it was the large caps alone that truly stole the spotlight.

The banking sector remained in focus despite concerns over subdued loan demand and potential margin pressure from rate cuts by the central bank. Adding a positive twist, Goldman Sachs’ bullish outlook on Indian banks underscored improving financial conditions, attractive valuations and prospects of a credit growth revival, factors that set the stage for a sectoral re-rating. Reflecting renewed investor confidence, the BSE Bankex scaled fresh record highs during the period.

The Nifty VIX, often regarded as the market’s fear gauge, spiked nearly 15 per cent during the fortnight, indicating a rise in short-term volatility and cautious sentiment among traders. Surprisingly, foreign institutional investors (FIIs) halted their prolonged selling streak and turned net buyers in most trading sessions during the fortnight, signalling renewed confidence in Indian equities. Domestic institutional investors (DIIs) also maintained their strong support, infusing over ₹22,000 crore into the market and providing a steady cushion against global volatility. Stay tuned for further updates!

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