Extending gains to the seventh straight trading session, both benchmark indices closed at all-time highs. The Sensex gained nearly 460 points, or 0.75%, to close at 61,765.59. Nifty ended up 138.50 points, or 0.76%, at 18,477.05 after hitting a high of 18,543.15. The BSE’s Metal index gained over 4% to a new high as base metal prices ran up further. Elsewhere in Asia, equities struggled with a slowdown in China’s growth in the third quarter contributing to the nervousness. Global financial markets have been weighed down by rising commodity prices, fanning fears that a resultant spike in inflation would force central banks to wind down their easy monetary policies sooner. The US Federal Reserve has already hinted it’s on course to start withdrawing its asset-purchase programme, which has led to a rise in bond yields there.
Price-to-earnings Ratio
Bank of England governor Andrew Bailey’s warning that there is a need to respond to price pressures has heightened the unease among investors. Amid the uncertainties, Indian stocks have been relatively resilient thanks to continued investor confidence in risk assets, especially among domestic individuals. “Valuation may be high but there has been all round flows and interest in the market – from domestic mutual funds, foreign funds and retail investors,” said Harsha Upadhyaya, CIO, equity, Kotak Mahindra Asset Management Co. The price-to-earnings (PE) ratio – a popular valuation measure – at almost 23 times of the Nifty, is at a 46% premium to its 16-year average. Foreign portfolio investors bought shares worth Rs 512.44 crore and domestic institutional investors sold shares worth Rs 1,703.87crore.
