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Sensex, Nifty50 clock all-time highs. What's driving optimism on Dalal Street

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Sensex and Nifty scaled lifetime highs of 53,887.98 and 16,146.90 respectively led by IT and financial stocks, surpassing their earlier peaks scaled on July 16.

Sensex, Nifty50 clock all-time highs. What's driving optimism on Dalal Street
Indian equity benchmarks roared to record closing highs on Tuesday -- with the Nifty50 index crossing the 16,000 level for the first time -- riding on hopes of recovery and earnings optimism, despite weakness in other Asian markets. Strong buying interest seen in IT, financial and FMCG shares pushed Dalal Street higher, though losses in metal counters played spoilsport.
The S&P BSE Sensex index surged 872.73 points or 1.65 percent to end at 53,823.36 and the broader Nifty50 benchmark climbed 245.60 points or 1.55 percent to 16,130.75 -- both record closing highs. Sensex and Nifty registered lifetime highs of 53,887.98 and 16,146.90 during the session, surpassing their earlier peaks scaled on July 16.
What's driving the market
Analysts say optimism on the corporate earnings front and the government's vaccination drive is boosting investor sentiment.
Strong buying interest in heavyweights such as HDFC, ITC, Titan, TCS, Airtel and Asian Paints is lifting the market amid upbeat macro data and hopes of economic recovery on the back of ongoing vaccinations, AK Prabhakar, Head of Research at IDBI Capital, told CNBCTV18.com.
What really provided support to the market was the ongoing earnings season that began on a very healthy note despite the Covid 2.0 impact, said Sneha Poddar, AVP – Research, Broking & Distribution, Motilal Oswal Financial Services.
"It helped the market largely sail through the headwinds of a possible third coronavirus wave, commodities-led inflation and volatility around the US central bank's 'taper talk'," she added.
Top gainers vs laggards
Titan, HDFC, IndusInd Bank, Nestle, UltraTech, SBI, HUL and Axis Bank, ending between 2.34 percent and 3.99 percent higher, were the biggest gainers among blue-chip stocks.
On the other hand, JSW Steel, Shree Cement and Bajaj Auto -- closing 0.78 percent, 0.33 percent and 0.30 percent lower respectively - were among the six laggards the Nifty50 universe.
HDFC, Infosys, TCS and ICICI Bank were the biggest boosts for Sensex, together contributing 350 points to the gain in the 30-scrip index.
Broader indices underperformed their headline peers. The Nifty midcap index edged higher and its smallcap counterpart dipped 0.24 percent.
Cummins, Godrej Industries, Deepak Nitrite, Dr Lal Pathlabs, Rossari and Trident were among the top gainers in broader markets. On the other hand, Vodafone Idea, RBL Bank, Coforge, PVR and Rain were among the laggards.
'Unlock optimism'
"The progressive unlocking of the economy has led to a spurt in economic activity aided by pent-up demand. Growth of 30-35 percent in corporate earnings looks a clear possibility in FY22," said VK Vijayakumar, chief investment strategist, Geojit Financial Services.
Analysts said trade data for July along with tax collections and fuel sales are supporting investors' sentiment.
"There is a distinct improvement in macros aided by decent growth in tax collections and a sharp turnaround in exports. The market is factoring in these positives. Retail investors' exuberance is aiding the momentum," added Vijayakumar.
Meanwhile, equities in other parts of Asia fell as the Delta variant of Covid-19 spread in key markets and put Chinese authorities on high alert, rattling investor confidence. MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.40 percent, while Japan's Nikkei 225 benchmark slid 0.50 percent.
European shares were off to a strong start on positive corporate earnings from companies such as BP and Stellantis. The United Kingdom's FTSE benchmark was up 0.38 percent in the first few hours of trade. France's CAC and Germany's DAX indices were up 0.76 percent and 0.07 percent respectively.