Indian stock market continued to forge ahead on Wednesday with the Nifty strongly perched above the 9,300 mark and the Sensex rallying above 30,100. A combination of strong global cues, strengthening currency and strong fund flow has not only taken the benchmarks to new highs, but have also managed to leave the rest of their global counterparts far behind.
The Sensex has raced 13 per cent higher since the beginning of this calendar, while the gain in the Nifty is 14 per cent. This performance is far superior to other developed market indices such as the Dow Jones (6.2 per cent), DAX (8.6 per cent) and FTSE (1.86 per cent).
Other emerging market indices have also lagged the Indian benchmarks with the Shanghai Composite notching just 1.2 per cent gain and the Russian RTS index recording 2.7 per cent loss.
There was an air of gloom in the market when 2017 began as the Centre’s move to demonetise Rs 500 and Rs 1,000 notes was expected to peg back growth, hurting corporate bottom-lines.
But as economic data and corporate earnings for the December quarter began trickling in, it became obvious that the listed companies and the country as a whole had weathered the demonetisation storm much better than expected.
The ruling party’s strong showing in the recent Assembly election gave a further boost to stock prices.
Global cues have been mixed with Donald Trump blowing hot and cold alternatively. But the result of the first round of French elections seems to have been trigger that has led to the most recent leg of the market rally.
Besides benign news flow, strength in the Indian rupee has also helped the Indian stocks. The rupee has surged 6 per cent against the dollar since the beginning of this calendar, mainly due to a weak dollar and strong foreign fund flow.
Strong currency is expected to help the Indian economy that is a net importer of goods.
Foreign portfolio investors have been quite positive about Indian equity markets since February this year.
The tide appears to have turned after the Budget 2017 with foreign investors net purchasing stocks worth $1.5 billion in February. They followed this up with net purchases of $4.7 billion in March, setting a new record for the inflows in the first quarter.
Besides foreign flows, domestic flows into equity market through mutual fund route have also been robust. Till the liquidity tap continues to gush, a sustained decline in stock prices appears unlikely.