Modi effect? Nifty crosses 8,000, sensex nears 27,000

MUMBAI: On the eve of Narendra Modi government’s 100 days in office, institutional buying took the sensex to a new peak and closer to the 27,000-mark while Nifty, for the first time ever, closed above the 8,000-level. The day’s strong rally came on the back of a stronger than expected GDP growth for the first quarter of fiscal 2015. This added Rs 1.26 lakhcrore to investors’ wealth with the BSE’s market capitalization now at an all-time high of Rs 94.1 lakhcrore.
With across-the-board buying, sensex closed 229 points higher at 26,868, while Nifty closed 73 points up at 8,028 as foreign investors net-pumped in over Rs 554 crore into Indian stocks, while domestic funds were net sellers at Rs 562 crore.
During the April-June quarter the Indian economy, which had clocked the decade’s low of 4.7% growth in fiscal 2014, jumped to 5.7% rate as non-agricultural GDP expanded at 6% on an annual basis — the highest in over two years. This was one of the main reasons for the day’s rally, market players said.
The gains in the medium term, too, are encouraging. After remaining range-bound for over two years, the sensex and the Nifty have gained about 45% in the last one year. If the performance of the markets were to be mapped since the Modi government came to power on May 26, the two leading indices have added between 8.5% and 9.1%.

“Markets are up not because performance of corporate India has changed dramatically but because the people who have money and have invested in India are bullish on the man who now leads India,” said Arun Kejriwal, director, KRIS, an investment advisory firm. Since the new government took charge in Delhi, FIIs have net-pumped nearly Rs 94,000 crore (about $15.7 billion) into the Indian market, about two-thirds of which was in debt and the balance in equity. “It is more than a coincidence that in the very first quarter of his coming to power, India’s GDP is the best in the last nine quarters,” Kejriwal said. Economists, too, are upbeat on the economy. With strong signs of a turnaround in the manufacturing sector, along with several other positive macroeconomic factors favouring the economy, they are revising upward their FY15 growth estimates.
“Based on Q1FY15 GDP growth at 5.7%, we are now revising our FY15 (full year) forecast to 5.78%,” SBI said in a note. “Non-agricultural GDP expanded at 6%, the highest since Q4 FY12. Our optimism is based on a stronger manufacturing growth, led by a modest investment revival propelled by an earlier than anticipated jump in discretionary consumer spending,” Soumya Kanti Ghosh, chief economic adviser, SBI wrote in the note.