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GDP growth propels markets to historic highs

Spurred by better economic growth in the April-June quarter of this financial year and sustained buying by foreign investors, the National Stock Exchange’s (NSE’s) Nifty on Monday closed above the 8,000 mark, for the first time ever. The index ended the day at 8,027.70, up 73.35 points (0.92 per cent) over its previous close. The BSE Sensex also scaled a new peak to close at 26,867.55, up 229.44 points (0.86 per cent).

“The gross domestic product (GDP) growth rate returned to the five per cent -plus level. That boosted sentiment… We are probably in the second phase of a bull market and not close to the summit yet,” said BSE Member Ramesh Damani.

“The liquidity is strong globally and markets, as a result, are doing well. The momentum is there and does not seem to be easing anytime soon… cyclical companies should do well if growth and sentiment look up,” said Ambit Investment Advisors Chief Executive Officer Andrew Holland.

India’s GDP, a measure of the country’s economic output, grew at its fastest pace in over two years. It grew 5.7 per cent in the three-month period from April to June, according to figures released last week.

Foreign institutional investors (also called foreign portfolio investors), were net-buyers to the tune of Rs 554.14 crore on Monday, according to provisional exchange figures. Domestic institutional investors net-sold Rs 561.69-crore shares.

Among the 3,070 scrips traded on BSE on Monday, there were nearly two advances for every stock that ended with losses. Eleven of the bourse’s 12 sectoral indices closed higher.

The indices tracking the metal and capital goods sectors were the biggest gainers. These were up 2.79 per cent and 2.75 per cent, respectively. The realty index was up 2.72 per cent, while the power index rose 2.6 per cent.

The BSE FMCG index, which tracks stocks in the fast-moving consumer goods sector, was down 0.67 per cent.

Deven Choksey, managing director of K R Choksey Securities, said the sectoral movements were function of a shift towards firms that would benefit from the growth momentum.

“There are some expectations of demand improvement and valuations are also attractive. Many metal companies are trading at single-digit price-earnings ratios… so this could call for some a shift in attention from defensives, which have had a good run, to cyclicals,” he said.

Among the biggest gainers on NSE on Monday were Hero Motocorp, which rose 6.46 per cent, Jindal Steel & Power (6.39 per cent) and Maruti Suzuki India (5.14 per cent). Defensive stocks like Sun Pharma and ITC ended with losses. India was also the best-performing market among Asian bouses on Monday. Indices from China, Sri Lanka, the Philippines and Japan rose between 0.34 per cent and 0.83 per cent. Volumes for the day stood at Rs 1.78 lakh crore, compared with an average volume of Rs 3.4 lakh crore during August.

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