A man is reflected in a mirror as he enters a hotel in Kolkata. (Photographer: Brent Lewin/Bloomberg)

Nifty’s Rally To Record Has An Eerie Similarity With 2008-Peak

The Nifty’s surge to a new record has been the least broad-based rally since the highs preceding the 2008 market crash.

The 50-stock index touched 11,185.85 early on Thursday, with only 54 percent of its constituents trading above the 200-day moving average. That’s the fewest since the January 2008 peak when only 52 percent were trading above the key technical level—a stock above/below it is considered in bullish/bearish territory respectively.

The Nifty and the Sensex are at all-time high levels, but one isn’t sensing the exuberance across participants, said Hemang Jani, head of advisory at the brokerage Sharekhan by BNP Paribas. “The rally has been primarily led by heavyweights such as Tata Consultancy Services Ltd. and the HDFC twins, which have given spectacular returns over the last one year, whereas the mid-cap index and stocks are still significantly lower than their highs.”

India’s equity benchmarks have hit a record even as a rising trade deficit, higher fuel prices, threat of a global trade war and the next year’s general election are expected to keep investors cautious.

Earnings will play a major role in determining the further upside, Jani said. “The long-term picture for Indian equities looks positive and we continue to prefer sectors such as private banking, consumer discretionary, information technology and pharma.”

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

Nifty’s  Rally To Record Has An Eerie Similarity With 2008-Peak

The Nifty Index has rallied more than 1150 points from the low point of this year on 23 March 2018. Here’s the top 5 contributors to that rally: