PremiumMUMBAI: The market capitalisation of National Stock Exchange hit a record $3 trillion on Thursday, fuelled by a rally in small and mid-cap stocks. On 21 May, India's oldest exchange BSE had achieved this milestone.
According to analysts, the Nifty and the Sensex have been consolidating since mid-January, driving liquidity into midcap and small-cap segments. Also, with most large-caps fairly valued, value investors started moving down the market cap pyramid. From their 52-week lows, Nifty MidCap has advanced 97%, Nifty Smallcap 134%, and Nifty 500 has risen 70%.
India’s stock markets surged on Wednesday with the Sensex crossing the 51,000-mark for the first time in nearly three months while the Nifty inched closer to its record high.
The recent rally has been driven by a decline in the daily number of covid infections, expectation of a rapid vaccination programme and signs of easing of lockdown curbs.
Better-than-expected March quarter earnings and optimistic commentary by many companies have also helped improve sentiments among investors.
"With market cap of domestic equities crossing US$3 trillion and market-cap to GDP over 110%, there is apprehension among investors about the sustainability of market rally. With no doubt, domestic equities have been mostly resilient throughout second wave of pandemic as absence of national lockdown, availability of vaccine and continued industrial/manufacturing/infrastructure activities albeit at slow pace with favorable supply chain offered comfort to investors", said Binod Modi, Head Strategy at Reliance Securities.
"A sharp drop in daily caseload in second wave and improvement in recovery rates have emboldened investors in last one week. Further, robust 4QFY21 earnings and favorable commentaries from managements also lifted sentiments," Modi said.
Going forward, the likely announcement of phased withdrawal of state level lockdowns and recovery in economic activities can help the market sustain the rally, he said.
"The overall structure of the market remains positive as many states are planning to ease restrictions in June which will help in revive economic activities. Stimulus if announced by government will further provide support to much needed sectors. Thus, as the 2nd Covid-19 wave recedes in India (active cases down ~1/3rd in 3 weeks from the recent peak) and pace of vaccination picks up in rest of the CY21, we hope and expect the journey will become little smoother. Easing of inflation worries by Fed further adds to the positivity", said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
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