A pedestrian walks besides Bombay Stock Exchange building at Dalal Street, Mumbai. (Photographer: Anirudh Saligrama/BloombergQuint)

Earnings, Weakening Rupee To Drive Rally In Indian Equities, Analysts Say

Indian equity benchmarks touched new all-time highs today on earnings optimism.

The S&P BSE Sensex surpassed the 37,000-mark for the first time and the NSE Nifty 50 Index breached its previous record of 11,071.55 touched on Jan. 29. Here’s what analysts said after the benchmark indices hit new highs:

‘Rally Driven By Fundamentally Sound Companies’

“It is encouraging to see fundamentally sound companies have participated in the rally and not the momentum or high beta stocks,” Jinesh Gopani, head of equities at Axis Mutual Fund, said. “The markets look for earnings growth which comes in only good quality enterprises.”

‘Liquidity In Favour Of Large-Cap Stocks’

Strong earnings and liquidity are in favour of a few large-cap stocks, helping the benchmark indices rally, Vikas Khemani, president and chief executive officer at Edelweiss Securities, told BloombergQuint in an interaction. “The investment over the next six-to-eight months in a volatile market would be best with a long-term view.”

‘Weakening Rupee To Help Large Caps’

The depreciation in the rupee will strengthen large-cap stocks in sectors like pharmaceuticals, information technology and export-oriented automobiles, helping the markets to drive further, market expert Saurabh Mukherjea said.

“We have been saying for the last seven-eight months that there will be a migration in market cap from small and mid caps to large caps, which is happening currently,” he said. “The rise in cost of money and inflation is always harmful for small- and mid-cap stocks.”

‘IT, Pharma Stand To Gain’

The longer-term picture for Indian equities looks positive as investors will remain cautious on factors such as global trade wars and the upcoming general elections, Hemang Jani of Sharekhan said. “We continue to prefer sectors such as private banking, consumer discretionary, Information technology and pharma,” he said. “With the rupee hovering close to 69 marks, we feel certain IT and pharma companies will benefit from these tailwinds.”

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