Markets continue to make fresh highs as investor confidence rise



Markets continued to rise on Thursday with both the benchmark indices hitting record high on Thursday. The BSE Sensex was up 568.90 points or 0.94% at 61,305.95. The Nifty was up 176.80 points or 0.97% at 18,338.55.

Markets in other parts of Asia-Pacific region were largely higher as Nikkei in Japan and South Korea’s Kospi were up 1.5% each.

According to Milind Muchhala, Executive Director, Julius Baer Indian markets continue to display strong buoyancy despite the gyrations that in the US markets on account of hardening of the US bond yields, concerns on peaking of growth and building up of inflationary pressures with a sharp increase in energy costs. “We have been seeing small intermittent corrections within the market at sectoral level, rather than at the headline index level. Domestic sentiment is clearly getting supported by the various measures being taken by the government to address some of the impending issues across various sectors,” he said.

Any disappointment in September quarter earnings could lead to some intermittent volatility, Muchhala added.

Investors will eagerly watch company results and clues about the outlook for the rest of the year in the coming weeks to see whether earnings growth justifies share-price gains during the sizzling stock-market rally this year. Higher raw material costs, including fuels, and shortages of products such as computer chips are expected to crimp profit margins in the fiscal second quarter. Corporate earnings in three months ending September are likely to be led by select sectors supported by recovery in domestic demand, highlighting economic recovery post covid has been uneven despite easing of lockdown restrictions post the second wave.

India volatility index or VIX fell 2.06% ending at 15.77 on Thursday indicating investors are not estimating any severe market corrections.

 “Bulls continued to remain in charge of Dalal street amid volatility, setting the stage for festive season. While there are not much negative triggers, macroeconomic trends keep improving month-on-month. Markets are in clearly festive mood and we are witnessing fasters sector rotation at play,” Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services Ltd.

However, rising crude prices continue to be risky for equities. Oil prices are up around 14% in October so far, with crude prices hovering at $83 per barrel.

 “Rising energy prices can pose risks to growth – inflation dynamics. However, we believe that improving demand conditions could provide some offset and reduce macro risks. This rise in energy prices, specifically oil, has prompted concerns of higher inflation, slower growth and whether this could lead to disruptive monetary policy tightening,” said Morgan Stanley.

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