Samvat 2078 started on a positive note for the stock markets, with the benchmark Sensex ending the ceremonial one-hour-long trading session at 60,068, with a gain of 296 points, or 0.5 per cent. The broader market Nifty 50 index ended with a gain of 0.5 per cent, or 88 points, at 17,917. Majority of the components on both the indices ended with gains.
Among Sensex stocks, Mahindra & Mahindra was the best performing stock with a gain of over 3 per cent, while HDFC Bank and Reliance Industries made the biggest contribution to index gains.
Buying shares on muhurat day is considered auspicious by several retail participants. Most investors indulge in ceremonial purchases. Institutional investors and brokers trade to price in global cues or key developments.
Global cues were positive on Thursday even though the US Federal Reserve said it will scale back its massive $120 billion monthly bond-buying programme. The Fed chair Jay Powell’s assurance that the central bank would be patient with interest rate hikes boosted investor sentiment.
This was the fourth straight year the market has notched up gains on Muhurat day.
“Typically, the Muhurat trading session ends on a positive note. Most of the investors think this is the best day to buy. They make token purchases, so there are more buyers than sellers,” said Ambareesh Baliga, an independent markets analyst.
The mood among those present at the BSE was cheerful following a year of superlative returns. The benchmark Sensex finished Samvat 2077 with a 38 per cent gain—most in 12 years. The midcap and smallcap indices jumped 63 per cent and 83 per cent during the year.
Most investors had a synonymous view that the returns this year will be positive but relatively muted.
Analysts believe investors will have to brace for more volatility over the next 3-6 months as the Fed and other central banks get ready to lift interest rates as inflation concerns rise.
“After a great year for equity markets, investors are looking forward to markets continuing rising though not at the same pace. Global headwinds in the form of rising inflation and withdrawal of monetary stimulus may impact the moment. However, strength in Indian macros and improving micros may help offset these. Investors need to conduct portfolio review, asset allocation review, and raise the quality of stocks held in their portfolio,” said Dhiraj Relli, MD & CEO, HDFC Securities.
The rise in crude oil prices, supply chain disruptions due to COVID 19, the economic crisis in China and geopolitical tensions between US and China are some other headwinds weighing on investors’ minds.
Most European and US markets logged fresh record highs. The Indian markets are currently off their record highs due to aggressive selling by overseas investors in the past fortnight amid valuation concerns,
Last month, two foreign brokerages downgraded the Indian markets citing expensive valuations. Foreign portfolio investors (FPI) were net sellers to the tune of Rs 13,350 crore in October. So far this month, they have sold shares worth Rs 4,583 crore.
Investors remained optimistic about the revival in the economy. The recent improvement in indirect tax collections, manufacturing activity, and companies’ quarterly results are seen as positive signals.
Last Samvat’s gains were underpinned by aggressive stimulus measures undertaken by central banks to support the economy battered by the pandemic. The enthusiastic participation of retail investors has driven returns over the past 4-5 months even as other emerging markets faltered.
A lack of adequate returns in other asset classes and lockdown induced restlessness, which gave them ample time to research and make informed decisions, leading to the increased participation of retail investors, say experts.
However, first-time investors might have to battle volatility going ahead.
“This Samvat is likely to be very volatile, unlike the one that has just concluded. Rate hikes by the Fed will lead to some capital flight from emerging markets like India, and this is likely to trigger some sharp correction in the market, ” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.