Sensex and Nifty 50 have reached unprecedented heights, marking an almost 8% surge in December

Sensex and Nifty 50 have reached unprecedented heights, marking an almost 8% surge in December. The domestic market is witnessing a wave of positivity, with both key equity benchmarks consistently maintaining positive trends for the last four trading sessions. December has seen a remarkable 7% increase, building on the substantial 5% gain from the preceding month.

 Several factors contribute to this recent market surge. Robust domestic macro numbers, a decline in US inflation, which fuels hopes for rate cuts, a continuous fall in US bond yields and the dollar, and substantial foreign portfolio investor (FPI) buying have all played key roles. Notably, Nifty 50 reached a fresh record high of 21,675.75, and the Sensex touched a new peak of 72,119.85 on December 27, with Sensex closing at 72,038.43, up 0.98%, and Nifty 50 closing at 21,654.75, up 1%.

 The total market capitalization of BSE-listed firms is now approaching ₹361.3 lakh crore, showcasing the strength of the current market momentum. Experts predict the trend to continue into 2024, with FPI investments expected to pour into India.

 

Five factors are identified as significant contributors to the heightened market sentiment. Firstly, hopes of a rate cut in the US have intensified as inflation cools, leading market participants to aggressively invest in stocks. Secondly, India's robust growth outlook, with Fitch Ratings anticipating resilient GDP growth of 6.5% in 2024-25 and a growth momentum expected to sustain in the coming quarters.

 

Thirdly, strong FPI buying has been evident, with foreign investors injecting substantial funds into the Indian financial market since November. As of December 26, FPIs have infused about ₹78,903 crore in December alone. Fourthly, the role of retail investors has become increasingly prominent, with a rising population contributing to the domestic market's resilience, countering foreign investors' selling pressure.

 

Lastly, there is a noticeable shift of money toward large-cap stocks. After substantial gains in mid and small-caps, investors are now opting for large-caps due to perceived valuation comfort. Analysts advise prioritizing high-quality blue-chip stocks with good earnings visibility, emphasizing the evolving dynamics of the market