Global Rally Boosts Indian Markets: Sensex, Nifty Surge as Investor Wealth Soars by ₹7.3 Trillion!

Indian stock markets surged, taking cues from strong gains in the US markets. The Nasdaq rose by 2.34%, and the Dow Jones increased by 1.39%, driving the Nifty up 1.65% to 24,541.15 and the Sensex up 1.68% to 80,436.84.

Who Bought Shares?

Domestic institutional investors (DIIs) bought shares worth ₹2,606.18 crore, and foreign institutional investors (FIIs) purchased shares worth ₹766.52 crore. Together, this fresh buying and short covering led to a total increase of ₹7.3 trillion in investor wealth, according to exchange data.

Why Are Markets Up?

The global rally was driven by better-than-expected consumer spending in the US, which rose by 1% in July compared to the 0.3% forecast by economists. This came after data showed that US inflation in July was the lowest in three years, easing fears of a recession. Earlier, the Dow Jones had fallen by 2.7% over two days due to unemployment rising to 4.3%, higher than the predicted 4.1%.

With inflation at 2.9% and strong consumer data, many investors now believe the US Federal Reserve might cut interest rates in their upcoming September meeting.

Impact on Indian Markets

The global optimism pushed Indian stocks higher, with private banks and technology stocks leading the charge. ICICI Bank, HDFC Bank, Infosys, TCS, and Reliance Industries contributed to over 40% of the Nifty’s 397-point gain.

Swarup Mohanty, CEO of Mirae Asset Investment Managers (India), noted that IT stocks rose due to positive global signals. He mentioned that while the global outlook remains uncertain, any positive global developments will support India’s consumption-driven economy. He also sees value in large-cap private banks, healthcare, and consumer stocks.

Concerns Over Earnings and Valuations

Earnings growth in India has slowed down. Data shows that 3,224 companies posted earnings growth of 7.3% year-on-year in the first quarter of FY25, compared to a 38.6% growth rate in the same quarter last year.

Shankar Sharma, founder of GQuant Investech, advised investors to avoid speculative stocks and focus on reasonably priced small-cap stocks. He sees potential in the apparel and engineering sectors.

Though large-cap stocks currently appear more attractively priced, some experts warn of overvaluation in parts of the Indian market. Kotak Institutional Equities pointed out that financials have fair valuations, while consumer, healthcare, IT, and pharmaceutical sectors are fully priced, and many public sector companies are overvalued.

In conclusion, while global trends are boosting Indian markets, there are concerns about high valuations and slowing earnings growth.