Jul 25, 2017 03:20 PM IST | Source: Moneycontrol.com
Five factors that lifted Nifty from 7000 to a historic high of 10,000
Experts started anticipating next targets on the Nifty, which they believe could be 11,000 but that is not so easy and at least not by Diwali.
Sunil Shankar Matkar Moneycontrol News
The Nifty50 finally hit the much-awaited five-digit mark of 10,000 on Tuesday, although a bit of profit booking followed considering the hefty rally.
At 13:14 hours IST, the index was trading at 9,954.45, down 11.95 points after hitting a life high of 10,011.30 in opening.
The Nifty took 21 years to hit 10,000-mark from 1,000.
Experts have already started predicting the next target on the Nifty. They expect the index to scale 11,000 though it may not be easy, and not by Diwali.
They believe the rally in last three years i.e. since the Modi government won general elections in 2014 till 2017 already discounted lot of factors that started showing results but are yet to reflect in absolute numbers - earnings as well as macro data.
"The way the market has ascended to 10,000 peak clearly points that a long-term bull market trend in India in a very healthy manner. So, I think investors are welcome but all investment should be done with caution," Vallabh Bhanshali, Chairman, Enam Securities said.
Deepak Parekh, Chairman, HDFC said, "It's a huge confidence on the political leadership. It is a confidence on Indian economy, the growth prospects and also the future. Stock markets always are ahead and they look at the growth possibilities and even today World Bank, IMF has come out with the projection for the next 2 years of 7.5-7.7 percent GDP growth rate."
Here are top five factors that helped Nifty scale 10,000-mark:-
It is the key reason that drove the Nifty from 7,000 level in May 2014 - when the Modi government won general elections - to 10,000-mark on July 25.
NDA government won a landslide victory in the general elections in 2014, giving a confidence to the market as well as investors.
Not only that, even in recent state elections like major ones Uttar Pradesh and in select civic polls, Modi-led government won majority.
Especially, after the one-sided win in UP, foreign as well as domestic investors believe Narendra Modi may win 2019 elections as well.
Foreign investors pumped in more than Rs 1.5 lakh crore since May 2014 during NDA regime while in the same period of UPA government’s first term i.e. May 2004 to July 2007, FIIs bought more than Rs 1.4 lakh crore worth of equities.
In March 2017, FIIs inflow at Rs 33,781.93 crore was the highest ever in a single month. Experts expect the flow of foreign money into India to continue in long term despite the rate hikes by Federal Reserve.
“The changing fundamentals of Indian economy under the regime of current government coupled with reviving growth prospectus has impelled foreign investor to take larger exposure towards Indian equity market,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.
Overseas investors have pumped in USD 25 billion (equity + debt) so far this year. The latest inflow follows net infusion of Rs 1.6 lakh crore in the previous five months (February-June).
Even FIIs poured in more than Rs11,000 crore in Indian equity markets for the quarter ended June and raised their stake in as much as 345 companies.
Majority of experts expect earnings in FY18 to be in double digits, driven by growth in second half of FY18 and further recovery in FY19.
The first half of FY18 is likely to be impacted by GST transition, followed by recovery in second half of FY18, they feel.
June quarter earnings, so far, have been stable and did not point out at any major risk. Even March quarter earnings, which were expected to be disappointing, were stable.
Experts also expect earnings recovery as they feel asset quality of banks has started improving and may gain pace in the second quarter of FY18.
Even GST transition, so far, has been smooth. Hence, that is unlikely to have major impact on earnings.
High GDP growth
Major reforms like GST, amendment of Banking Regulation Act, passage of Insolvency & Bankruptcy Code, RERA, black money etc with support from normal monsoon for the second consecutive year, and benign commodity prices (especially crude as India imports more than 70 percent of oil requirement) are likely to support the economy growth in long term.
Majority of economists believe India's GDP growth will be above 8 percent in FY19.
India will stay ahead of China on the growth curve in 2017 and 2018, said the International Monetary Fund (IMF) while retaining the country's GDP forecast at 7.2 percent for the current fiscal on Monday.
China's growth, the IMF said, is expected to remain at 6.7 percent in 2017, the same level as in 2016, and to decline only modestly in 2018 to 6.4 percent.
Global growth for 2016 is now estimated at 3.2 percent, slightly stronger than that of April 2017. This primarily reflects much higher growth in Iran and stronger activity in India following national accounts revisions, the report said.
Narendra Modi-led government has been pushing lot of reforms since 2014. One major reform was the passing of Goods & Services Tax - one nation one tax, which is going to boost the economy in long term and close the loopholes for tax avoidance.
Other one is the Real Estate (Regulation and Development) Act, 2016 (RERA) that is effective from May 1, 2017. It is aimed to protect the interest of consumers and to ensure the execution of projects on time.
The government also cleared Banking Regulation Act and Insolvency & Bankruptcy Code that will push banking sector, the main engine of economic growth. Faster resolution to non-performing assets and getting banks on track to support economic growth will be key motives.
Apart from that, the government has also been pushing for reforms for revival in infrastructure, housing and many more sectors.