India’s benchmark stock indices closed at their lifetime highs on Monday, as investors bet on the possibility of a U.S. stimulus and President-elect Joe Biden moving to revoke curbs on H-1B visas when he assumes power. Indian technology firms would benefit if they are able to send more workers to client sites in the U.S. on H-1B visas.
The rally continued for the sixth straight session that the indices. Led by financial and technology stocks, equities recorded the sixth straight day of gains. But analysts warned that the rally and stock valuations may not sustain in the long run.
The BSE Sensex surged 704 points or 1.68% to 42,597.43, its historical high. Only two stocks from the 30-share Sensex were in the red.
Top gainers included IndusInd Bank, Bharti Airtel, ICICI Bank, Axis Bank and Power Grid. The BSE IT Index climbed 1.5% while the Bankex rose 2.8%. The NSE Nifty 50 also surged 1.6%, or 197.5 points, to a lifetime high of 12,461. Britain’s FTSE and Germany’s DAX went up by about 5% each, while France’s CAC rose by about 7%. Arjun Yash Mahajan, head, Institutional Business, Reliance Securities, said, “Expectations of a large fiscal stimulus from the U.S. following Biden’s [victory] fuelled global markets.... Improved sentiment with regard to possibility of stronger liquidity and better 2Q corporate earnings are likely to persist in the near term”.
‘Stretched valuations’
“However, current valuations look... quite stretched and the market has factored in a robust above-30% earnings growth in 2021, which will be quite challenging given the muted expectations [on] sharp revival in government and private capex. A sustainable rally in the long-term looks to be challenging,” he added. Nish Bhatt, founder and CEO at investment consulting firm Millwood Kane International, said, “A stronger bilateral relationship with the U.S. under the new administration will help Indian businesses”.
He said Mr. Biden’s plans to raise the H-1B visa limit and remove country quotas for green cards was a positive for Indian IT firms. “Mr. Biden at the White House means less protectionism, a sign of ending tariff wars.
“The market is rallying on hopes of fewer regulations... under [him]. India seems to be in a sweet spot and may gain as the U.S. under Mr. Biden is unlikely to ease pressure on China,” he added.