Benchmark indices posted their biggest single-day gain in more than a week amid a rally in banking shares. After three days of decline, the S&P BSE Sensex rose 446 points, or 0.7 per cent — the most since June 16 — to end at 63,416. The National Stock Exchange Nifty50 gained 126 points, or 0.7 per cent, to close at 18,817.
The BSE Bankex, a gauge for the performance of banking stocks, rose 1.2 per cent. Most global markets were mixed as traders awaited the next set of data and comments from policymakers to get a hint of the interest rate and economic growth outlook.
“The domestic market rallied, primarily supported by banking and finance stocks, which received a boost from the merger updates from HDFC. In the meantime, global trends were mixed as the Chinese market showed signs of recovery, driven by hopes of additional policy stimulus, whereas European markets traded with declines in response to hawkish commentary from the president of the European Central Bank,” said Vinod Nair, head-research, Geojit Financial Services.
Six of the seven top gainers on the Sensex were banking stocks, led by State Bank of India. HDFC Bank and HDFC made the biggest contributions to the index gains. They rose over a per cent each after HDFC Chairman Deepak Parekh said that the merger between the two financial sector behemoths would become, effective July 1.
The merger is expected to lead to huge inflows from global passive index trackers.
Last week, the Sensex and the Nifty surpassed their closing highs set in December last year. From this year’s low, the Sensex and the Nifty have rallied 10 per cent, while the broader market’s Nifty Midcap 100 and the Nifty Smallcap 100 have surged more than 20 per cent each.
The sharp upswing in the market has once again pushed valuations into expensive territory, observe analysts.
The Nifty now trades at over 20x its estimated earnings for 2023–24. Experts believe financials is one sector that still offers value.
“The broad-based rally across sectors and stocks in the past few weeks has resulted in rich valuations for the consumption and investment sectors versus history. Most stocks in these sectors are trading close to or above their 12-month fair values. Valuations of outsourcing sectors may look reasonable compared to history, but the information technology services sector faces both short- and medium-term challenges. Valuations of most financial stocks are still attractive despite the recent run-up in insurance stocks,” reads a note by Kotak Institutional Equities.
Only three Sensex stocks ended with losses, which included Maruti Suzuki, ITC, and Hindustan Unilever.
Overall market breadth, too, was positive, with 1,970 stocks gaining and 1,530 declining.
Foreign portfolio investors (FPIs) bought shares worth Rs 2,024 crore, while domestic institutions were net sellers to the tune of Rs 1,991 crore, showed stock exchange data.
June is likely to be the fourth straight month to witness positive FPI flows. So far this month, overseas funds have pumped in more than Rs 30,000 crore.
Global investors are also eyeing developments in the US-China relationship.
A positive sign emerged from a report that US Treasury Secretary Janet Yellen plans to visit Beijing early July for the first high-level economic talks with her new Chinese counterpart, He Lifeng.
However, the Joe Biden administration expects to have an executive order ready as soon as July that would regulate and potentially prohibit some US investments in China, according to a Bloomberg report.
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