MUMBAI: Indian stocks hit fresh all-time closing highs on Friday encouraged by the overnight strength on Wall Street and buoyed by foreign funds buying for the fourth successive day. Benchmark indices rose 0.5% helping the market end the opening week of 2018 on a high note.
The 30-share Sensex rose 184 points to end at 34153.85 after reaching intra-day high of 34,188.85. Similarly, Nifty touched a life high of 10566.10 before ending at a record 10558.85, up 54 points from the previous close. The BSE midcap index too ended at a record level, advancing 0.7%. The volatility index — a measure of traders' perception of near-term risks in the market — fell 2.2% to 13.11. Yes Bank rose 5% to Rs 333 while Adani Ports, Bharti Airtel, IndusInd Bank and Dr Reddy's Laboratories gained 2-4%.
FPIs Turn Net Buyers for Fourth Straight Day
"Markets globally are looking good, hitting records everywhere. That has helped stabilise the market," said Andrew Holland, chief executive officer at Avendus Capital-Alternate Strategies.
Most Asian stocks ended firm on Friday after the Dow Jones index finished above 25,000 for the first time overnight. While the Indian benchmark indices managed to turn positive for the week after the gains on Friday, they were underperformers in Asia. Analysts said while the market momentum is positive, the undertone has turned cautious because of rich share valuations compared to other emerging market peers.
The Nifty is trading at an estimated price to earnings ratio of 21.34 times compared to 13.09 times for the MSCI EM index.
Foreign portfolio investors were net buyers for the fourth straight day, adding shares worth about Rs 581 crore on Friday. So far in 2018, they have purchased shares worth Rs 1,670 crore. Analysts said the consecutive foreign purchases were encouraging but the quantum of buying is moderate.
FOCUS ON EARNINGS
The market's focus will now turn to the December quarter earnings, which will start trickling in from next week. Corporate earnings for the third quarter are expected to be better mainly due to the low base effect of the same quarter last year which was affected by demonetisation of Rs 500 and Rs 1,000 denomination notes.
Investors will also soon begin building up expectations from the Union Budget, which will be presented on February 1. The government's fiscal deficit target for the new financial year will be the most closely watched as a wide deviation would result in the market reacting adversely.
"The biggest factor to watch out for is whether the government is able to continue on the fiscal consolidation path at a time GST revenues are fairly sluggish," said Sanjeev Prasad, co-head at Kotak Institutional Equities.
The government plans to borrow an additional Rs 50,000 crore in the current financial year, raising concerns that it may miss the fiscal deficit target. Prasad said the market will also need to see what kind of additional tax measures they may adopt to increase tax revenue.
"There is concern that it could be in the form of government imposing long term capital gains on equity or increase the holding time limit to three years from one year. Such a measure will not contribute much in terms of revenue to the government but it will disrupt sentiment significantly," said Prasad.