The benchmark Nifty index documented its longest-ever winning streak on Friday, as it rose for the 12th consecutive session. Information technology (IT) and pharmaceutical companies continued to drive the gains on the back of investor optimism over interest rate cuts in the US.
Both Nifty and Sensex rose 0.3% each to close at all-time high levels of 25,235.90 points and 82,365.77 points, respectively. With this, the indices have now risen for three consecutive weeks, and ended an action-packed August month with around 1% gains each.
The broader market, too, saw strong gains on Friday and for the month, pushing investors wealth to a record high of $5.54 trillion.
The gains have largely been driven by positive global cues with easing concerns over the US economy and hopes of a rate cut by the Fed. Apart from this, supportive domestic macroeconomic factors and monsoon have provided comfort to investors, analysts said.
Foreign portfolio investors bought shares worth $3 billion (approximately Rs 25,061 crore) during the week, partly driven by the InterGlobe Aviation (IndiGo) bulk deal, while domestic institutional investors bought shares worth Rs 1,198 crore.
The Nifty Pharma and Nifty IT indices were among the top sectoral gainers for the week as they rose 3.1% and 4.1%, respectively. All sectoral indices on the NSE, barring the Nifty PSU Bank and Nifty FMCG indices, ended the week with gains.
“As markets continue to reach new all-time highs, finding sectors with a favourable risk-reward balance has become increasingly challenging. However, despite stretched valuations, certain sectors such as private financials, IT, and agrochemicals present attractive opportunities for investors,” Krishna Appala, senior research analyst at Capitalmind Research, said.
The gains across sectors drove the Sensex 1.6% higher for the week and the Nifty by 1.7%. The broader market showed mixed performance this week with the BSE Midcap index rising 1.5%, but the BSE Smallcap index underperforming with 0.6% returns.
However, analysts highlighted resilience in the broader market despite their sharp outperformance over the last few years. Some pointed out that a strong showing by some smaller companies in the latest quarter of earnings has eased valuation concerns.
“Over the past five years, Nifty 50 companies have achieved a 17% EPS CAGR, whereas Nifty Midcap 150 companies have seen a CAGR of over 20% and Nifty Smallcap 250 have seen a CAGR of more than 25%,” said Mythili Balakrishnan, co-fund manager at Alchemy Capital Management.
Acknowledging the role of increased liquidity in fuelling a rally in the broader market, Balakrishnan said the growth differential is also contributing to their premium valuations.
