Indian equities have joined a strong global rally driven by a rush of liquidity.

For the first time after the rout in March, the Nifty on Wednesday ended the day above the psychologically crucial mark of 10,000, taking cues from other global markets. Indian equities have joined a strong global rally driven by a rush of liquidity. Expectations of more fiscal stimulus measures, hopes of a Covid vaccine and reopening of economies across the world buoyed markets. The banking and financial stocks, which had been hammered the most, were responsible for the markets rallying for the sixth straight session. Nifty Bank rose by 2% during the day’s trading session.

The benchmark Nifty50 ended marginally off its highs, gaining 82.45 points or 0.83%, to close at 10,061.55, while the Sensex rose 284.01 points or 0.84%, to close at 34,109.54. The markets witnessed a volatile last hour of trade which led to the benchmarks losing some of the gains that they made during the trading session on profit booking. Last week, the Nifty was trading at the 9,000 mark but it has jumped by 1,032.5 points in seven trading sessions. Market experts believe that the swift rally in the Nifty is because Indian stock markets have started playing catch up with other global markets.

Asian markets rose to a three month high during the day’s trading session with bourses in Hong Kong, Taiwan and South Korea rallying between 1.73% to 2.87%. China’s Shanghai Composite witnessed a flat trading session, rising by 0.07% during the day. The European indices were also trading higher at the time of press, with stock markets in the United Kingdom, France and Germany rising between 1.28% to 2.3%. Compared to global markets, the Indian market continues to underperform but the extent of underperformance of the Indian markets has reduced. Rusmik Oza, executive vice president — head of fundamental research, Kotak Securities, said, “India barring Brazil is the only country where the cases of Covid-19 in spite of a lockdown have gone up, this had made investors wary and had caused the underperformance of the Indian markets. With India beginning to exit the lockdown, investors are taking it positively and foreign portfolio investor buying has resumed.”

The premium that India was commanding over emerging markets (EMs) had gone down to 31% recently against the 10 year average of 38% and peaks of more than 60%. So far, since the start of the year, MSCI EM has seen a decline of 14.2% outperforming the MSCI India which is down by 15.2% year-to-date. U R Bhat, director, Dalton Capital Advisors (India), said, “The markets are currently catching up with the other global markets but, if there is a slow and prolonged recovery in the Indian market, instead of a “V” shaped recovery that the market is currently factoring, the India valuation premium over most other EMs can start contracting significantly. That said, if there is indeed a V-shaped recovery, the Indian market is likely to enjoy the premium over most other EMs.”

Foreign portfolio investors have so far bought stocks worth $2.9 billion since May 26 when the markets witnessed a steep upmove. Ahead of the weekly expiry on Thursday, the F&O segment saw volumes worth Rs 17.25 lakh crore against the six month average of Rs 13.9 lakh crore. On the other hand, the cash market saw volumes worth Rs 65,871.9 crore against the six month average of Rs 43,047.1 crore.