Sensex climbs 40,000 for first time since February 25 — what Mr Market seems to be discounting

The equity market continued its rally for the sixth consecutive session with the BSE Sensex reclaiming the psychological 40,000 mark for the first time since February 25 this year.

The rising expectations for better earnings in the September quarter after TCS reported higher-than-expected numbers with a big share buyback of Rs 16,000 crore, and hope for a stimulus package in the US and India along with global liquidity could be driving the market rally.

The BSE Sensex rallied 5.8 percent to close at 40,182.67, while the Nifty50 gained 5.5 percent at 11,834.60, driven by technology and bank stocks.

Despite the poor economic data points and significant earnings drop, the market is around 5 percent away from its record high levels touched in January this year.

"The market is rallying thanks to the surge in global liquidity, balance-sheet expansion by central banks, and stimulus measures by governments. Since the markets tend to discount the future, it can be argued that Mr. Market is expecting a quick earnings revival, speedy approvals for vaccines, and strong global liquidity. So, it will be interesting to see how things pan out in the next 3-6 months," Prasanna Pathak, Head - Equity & Fund Manager at Taurus Mutual Fund, told Moneycontrol.

"The markets are ignoring many negative news and risks recently. But then, like it is said - 'In the short-run, the Market Is a Voting Machine, but in the long-run, a Market Is a Weighing Machine," he said.

Earlier the fiscal stimulus expectations are low due to weak fiscal position, but the recent government comments clearly indicated that there could be another big package to revive the economy.

TCS' September quarter numbers which beat on all earnings parameters, along with a hefty Rs 16,000 crore worth of share buyback and expected buyback from Wipro also lifted sentiment. Banks' provisional data points related to the September quarter also aided the momentum.

The stimulus hope also built up ahead of the RBI monetary policy tomorrow, while in the US, expectations are rising for another stimulus package.

"In the US, an intermediary aid has been provided before the final stimulus which is expected post the election. The market is moving positively in line with the enhancement of easy money policy and the corporate results," Vinod Nair, Head of Research at Geojit Financial Services, said.

Mohit Ralhan, Managing Partner & CIO, TIW Private Equity, also feels the Indian market is taking a cue from global markets.

"The expectation of a new round of COVID stimulus packages in the USA has gone up. The earning season in India has also started on a positive note with IT bellwether TCS announcing a massive share buyback programme. The sentiments have turned positive but the upcoming earning announcements will set the tone for further market movement."