Sensex leaps last 10,000 points at fastest pace ever; 4 stocks key drivers

MUMBAI: It took the benchmark BSE-Sensex index merely 161 trading sessions to make the journey from 50,000 points to 60,000 points, the fastest pace ever for a 10,000-point move on the index. Prior to this, the index had taken on average 931 sessions for a 10,000-point move.

The breakneck pace of the gains for the index is representative of the strength of the current bull market in Indian equities that started at the depths of the crash in March 2020. Since then, the BSE Sensex has risen over 135 per cent as a tsunami of global liquidity and a faster-than-expected earnings recovery from the pandemic lows boosted sentiment.

“In the short term, the market could continue to inch up. The local factors are very positive, the vaccination pace has been picking up and hopefully we will not have a third wave,” Pratik Gupta, CEO and co-head – institutional equities at Kotak Securities told ETNow in a recent interview.

While the liquidity support provided by global central banks, including the Reserve Bank of India, was responsible for the initial ignition of this bull market, lately the gains have been driven by expectations of robust earnings growth and economic recovery.

Analysts expect earnings of index companies to grow at over 35 per cent in the current financial year and over 20 per cent in the next financial year. At the same time, economic growth is expected to pick up pace in light of higher vaccination rate and receding threat of a severe third wave of the pandemic.

“We are coming out of very difficult times for the economy. Not only in the last two years, but even in the last four-five years we have had one shock after another which had set back the economy,” Anand Shah, Head of PMS and AIF investments at ICICI Prudential AMC, told ETNow recently.

As has been a typical feature of this market, the journey of Sensex from 50,000 points to 60,000 points has been led by a diverse set of companies. The top five gainers in the period include two non-bank lenders, a steel company, a state-owned bank and an information technology company.

However, the biggest contribution to the Sensex’s 20 per cent gains from the 50,000 points mark has come from Infosys (up 30 per cent), Reliance Industries (up 19 per cent), ICICI Bank (up 30 per cent) and Bharti Airtel (up 25 per cent).

At its current pace the benchmark index is on course to hit the 70,000-mark by June 2022, but risks are emerging on the horizon that could puncture this ride.

Global growth is already tipping over after a V-shaped recovery from the depths of the pandemic led by the slowdown in the Chinese economy. Concerns over high inflation have also raised risks of tighter financial conditions in 2022 as economists expect the RBI to increase interest rates starting as early as February.

“Brisk economic recovery in India might prompt the RBI to slow down the liquidity support impacting equity market sentiments,” said brokerage firm Jefferies India in a recent note.