The Hindu Business Line : Sensex hits 20,000 intra-day on strong corporate show

The benchmark Sensex had its first brush with the milestone of 20,000 as corporate earnings reports sent stocks soaring for the second consecutive trading day on Monday.

The Sensex gained by 734.5 points or 3.82 per cent over Friday’s close, finishing the day at 19,977.67.

The broader Nifty gained by 3.51 per cent, to close at 5,905.9 points.

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A distinctive feature of Monday’s trading was that both FIIs and domestic institutions (DIIs) were net buyers for equivalent amounts, this for the first time since the rally that started in mid-September following the US Fed rate cut.

FIIs were net buyers for Rs 689 crore and DIIs net buyers for Rs 634 crore on both NSE and BSE, according to provisional figures.

P-Notes effect

While domestic institutions were buying, the regulation on participatory notes kept FIIs from selling, said Mr Deven Choksey of KR Choksey Securities.

“If foreign funds sell through P-Notes (underlying derivatives) and take money out, they cannot reinvest again, so they stayed invested. There were no sellers available, so the new funds coming in had to buy at current levels itself.”

There was steady buying by mutual funds, which have investors diversifying into more schemes, he added.

There is also a fear of recession in the US next year, so foreign funds continue to pour in, said another official with a large broking house. “We saw the Asian markets doing well, also there is some expectation of a Fed rate cut again,” said Ms Shahina Mukadam, Head of Research at IDBI Capital Market Services.

“Net buying by the FII and DII segments amounted to only Rs 1,300 crore which, for a 700-point rise, looks very much on the lower side,” said Mr Arun Kejriwal of Kejriwal Research Information Services. “This shows that there is more of speculation, people, including the retail segment, are investing because they don’t want to be left out from the rally that they see happening.”

The markets were also taking into account the corporate results of SBI, which were announced after market hours last week.

L&T continued to sail on its good earnings reports, gaining by Rs 400 on Monday; this being on top of the Rs 400-plus gain it already notched up on its results day last week.

Maruti’s results were in line with expectations, while HDFC too did very well, said analysts.

As to whether the markets’ vaulting ambitions are overstretching it to a snapping point, market players felt there was still more space to go.

“The markets are trading at 21 times earnings on a six month forward basis, and 19 times earnings on a 12 month basis,” said Mr Choksey. “This is not much when you look at a 9-10 per cent growth.”

The market breadth was positive, with 1,579 stocks advancing on BSE (55.58 per cent). Declines were 1,200.

The top Sensex gainers were L&T at 10.33 per cent, and HDFC (9.63 per cent).