The news over the weekend that Democratic nominee Joe Biden will be the next US president—that will ensure easy liquidity and a weaker dollar for the global market — prompted foreign fund managers to press the buy button in almost all the emerging markets, including for Indian stocks, institutional dealers and fund managers said. As a result, net buying by foreign funds in the domestic market was Rs 4,548 crore, one of the highest single-session inflows in recent months, which at a record Rs 164.5 lakh crore made investors richer by about Rs 2.2 lakh crore. Post the market’s closure, Pfizer’s announcement took the Dow Jones and S&P 500 indices in the US to new peaks.
The positive news about a Covid vaccine, combined with the recently announced good quarterly results by Indian companies, is expected to keep the domestic market rally going. Since its multi-year low of 25,639 points on March 24 this year — just after a nationwide lockdown was announced — the sensex has rallied over 66% while BSE’s market cap has jumped by Rs 63.6 lakh crore.
According to Taher Badshah, CIO–Equities, Invesco Mutual Fund, a clear verdict in the US, combined with the vaccine news, would ensure two things. In the US, there would be a credible plan to control the second wave of the Covid pandemic and a better plan for the stimulus for the largest economy in the world. These factors makes the “global outlook better”, he said.
On the domestic front, domestic investors could draw “comfort, confidence and strength from the normalcy of (corporate) earnings, even though many parts of the economy are yet to return to the pre-Covid levels”, Badshah said. Although the leading fund manager feels that in the short-term valuations in India can fluctuate a bit, global factors and Indian corporates’ return to normalcy are expected to hold the market at elevated levels.
Chartists too feel that the rally is unlikely to fizzle out in a hurry. “Near term trend of nifty continues to be positive and more upside could be in store in the coming sessions,” said a note from Nagaraj Shetti, Technical Research Analyst, HDFC Securities.
On Monday, buying was across the board with ICICI Bank, HDFC Bank, Infosys, Reliance Industries and Axis Bank contributing nearly two-thirds of the sensex’s gains. On Tuesday, the market may witness some volatility due to results of Bihar state elections, market players said.