During the day, it climbed 621.08 points, or 0.83%, to reach a new intra-day record high of 74,869.30.
Expectations of a sustained turnaround in companies with large equity bases drove the rise in their market capitalization, Relli explained.
But overall, he added, there is a reason why India has become the fifth largest country in the world in terms of market value.
On the domestic inflow front, domestic institutional investors (DIIs) have been net buyers in Indian equities since August.
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The Indian stock market’s valuation crossed ₹400 trillion in a historic milestone on Monday, the last ₹100 trillion coming in the shortest duration of a mere nine months, with the country’s bright macroeconomic fundamentals encouraging local and foreign investors to plough more money into equities.
The 30-share BSE Sensex jumped 494.28 points, or 0.67%, to settle at 74,742.50. During the day, it climbed 621.08 points, or 0.83%, to reach a new intra-day record high of 74,869.30.
“BSE listed companies’ market capitalization has risen 8.4% in 2024 (vs 7.1% for BSE 500) and 53.9% since 1 April, 2023 (vs 42% for BSE 500)," said Dhiraj Relli, MD & CEO of HDFC Securities, attributing the increase to a “broad-based" uptick triggered by fund flows, domestic and foreign.
Apart from the improvement in India’s macroeconomic fundamentals, analysts attribute the boom to higher allocation towards equities and new investors entering the markets directly and through mutual funds. Expectations of a sustained turnaround in companies with large equity bases drove the rise in their market capitalization, Relli explained.
And at least some of the increase in market capitalization came from new listings such as Medi Assist Healthcare, Jyoti CNC Automation and Juniper Hotels.
India is currently experiencing a mini-Goldilocks moment due to solid macroeconomic and microeconomic conditions, which gives investors confidence about its long-term uptrend, said Ajay Menon, managing director and chief executive officer, broking and cdistribution, Motilal Oswal Financial Services. Menon predicts intermittent volatility along the way, driven by notable events such as the general election, expensive mid- and small-cap valuations, and potential global macro shake-ups.
But overall, he added, there is a reason why India has become the fifth largest country in the world in terms of market value. “Nifty signed off FY24 with a stellar return of 29%, as India is set to exit FY24 with a GDP growth of 7.6%+ and earnings growth of 20%+," highlighted Menon, pointing to other factors such as a record addition in demat accounts and robust domestic inflows.
In March 2024, 3.13 million demat accounts were added, bringing the total to 151.38 million.
On the domestic inflow front, domestic institutional investors (DIIs) have been net buyers in Indian equities since August. In March, DIIs net bought ₹56,311.60 crore.
During the Monday trading session, the Nifty 50 of the National Stock Exchange and the BSE’s Sensex hit 22,697.30 and 74,869.30 points, respectively, the highest for both the headline indices.
The key growth drivers for the Indian markets include a strong macro environment, policy continuity and the emergent opportunity to establish India as a major supplier in the global manufacturing supply chains under the China+1 strategy, said market expert Ajay Bagga. “We expect foreign investment flows to ratchet up in the second half of the year," he added.
Initial data from a few companies indicate strong business outcomes for the March quarter, raising investor hopes for a good finish to earnings in FY24 and their continuing momentum in FY25, said Taher Badshah, chief investment officer at Invesco Mutual Fund.
“Until markets encounter any meaningful negative catalysts, they are likely to continue displaying strength," Badshah said. While valuations may have become pricey, there’s a prevailing optimism that Q4 performance would be strong given the robust macroeconomic backdrop, further buoyed by likely policy continuity, he added.
The current price-earnings multiple of the Sensex stocks (this is a measure of how overvalued or undervalued a stock is by simply dividing a company’s share price by its earnings per share, either past or expected) is 21.12, well off the February 2021 highs in excess of 36. That isn’t inexpensive, but it isn’t overvalued either.
Will the market continue to rise?
That’s a tough question to answer, especially because some experts believe it has already factored in political continuity, but on the earnings front, DSP Asset Managers expects that after last year’s 20%, earnings will grow by 16% in 2024-25.
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