The Sensex gained 408.86 points, or 0.55%, to close at 74,085.99 after hitting a record 74,151.27. The Nifty rose 117.75 points, or 0.53%, to close at 22,474.05 after hitting an all-time high of 22,497.20. Both indices, which were trading lower earlier in the day, rebounded in the latter half.
“The markets are witnessing sector rotation and today we saw buying interest in banking stocks,” said Siddhartha Khemka, head, retail research, Motilal Oswal. “Some or the other sector is supporting the bullish sentiment after GDP data surprised positively.”
Despite volatility ahead of elections, momentum is likely to continue with the Nifty expected to move toward 22,700 levels in March and 23,000 in April, Khemka said.
Agencies Global Indices
The NSE Private Bank Index gained 0.9% with Kotak Mahindra Bank advancing 2.6% and Axis Bank moving up 2.1%.
“Banks were beaten down since the past two months after their lacklustre performance,” said Sandeep Raina, executive vice president, research, Nuvama Professional Clients Group. “Till elections, the markets are likely to witness up moves followed by down moves.”
The rise in the benchmark indices was in contrast with the selloff in small stocks, reflected in the advance-decline ratio. Out of the 3,940 stocks traded on the BSE, 3,000 fell, while 856 rose.
The Nifty Smallcap 250 index dropped 2%, the Nifty Microcap 250 index fell 2.5% and the Nifty Midcap 100 index dropped 0.5% on Wednesday.
Markets are at expensive valuations, but no sharp corrections are expected, indicating range-bound movement to persist, analysts said.
Largecap stocks are expected to outperform since the valuations have run up in smallcap and midcap stocks and there could be some profit booking in these, they said. That’s in addition to cautious investor sentiment after the capital market regulator asked fund managers to protect investors from the froth in small and midcap mutual funds last week.
“Post the Sebi advisory against midcaps and smallcaps, investors have turned cautious on these segments,” said Khemka. “The sentiment has significantly improved for largecaps which have not performed much.”
Analysts warned of further correction in these segments.
“There are no worries with respect to largecaps but midcaps and smallcaps could witness further corrections post the sharp runup,” said Raina.
On Wednesday, Wall Street’s main indices rose after Federal Reserve Chair Jerome Powell in congressional testimony reiterated the message he delivered in January – that interest-rate cuts are likely this year provided inflation data continues to show improvement. At the time of going to press, the Dow Jones Industrial Average was up 0.58%, the S&P 500 was up 0.78%, and the Nasdaq Composite was up 0.83%.
Elsewhere in Asia, Hong Kong gained 1.70%, Taiwan ended 0.58% higher and China fell 0.26%. South Korea ended 0.30% lower and Indonesia rose 1.14%. The pan-Europe index Stoxx 600 was up 0.39%.
In the India market, foreign portfolio investors (FPIs) bought shares worth a net ₹2,767 crore on Wednesday. Domestic counterparts were buyers to the tune of ₹2,150 crore. These purchases include some large block trades. The markets are expected to inch higher to new highs before the elections, analysts said. However, some consolidation is also likely, they said.