Private banks lift Indian shares to record closing highs
Indian shares recovered from a muted start to log record closing highs on Thursday, led by private banks and metals, while a dip in pharma stocks capped gains.
The NSE Nifty 50 settled 0.22% higher at 23,567, while the S&P BSE Sensex added 0.18% to 77,478.93.
The Nifty has logged record closing highs in five out of six sessions, while the Sensex has ended at all-time highs for five consecutive sessions.
Sector rotation towards large-cap banking stocks will likely continue due to their valuation comfort, keeping the benchmarks buoyant, analysts said.
Heavyweight private banks gained 1.16% after Macquarie said it preferred them over other financials, given their stable earnings outlook.
It upgraded Kotak Mahindra Bank and City Union Bank to “outperform” from “neutral”, spurring a 1.12% and 5.86% rise, respectively.
The banking sector remains in good health, with expectations of robust loan growth and healthy asset quality boosting its prospects, said Chandraprakash Padiyar, senior fund manager at Tata Mutual Fund.
Metals rose 1.82%, led by a 4.79% gain in Vedanta after a report said top shareholder Vedanta Resources plans to keep its stake in the miner instead of selling it.
In contrast, pharma stocks dropped 0.51%, weighed down by heavyweight Sun Pharma, which fell 2.19% after one of its facilities received a warning letter from the U.S. FDA.
Among other stocks, Brigade Enterprises climbed 1.71%, powering the realty index 2.02% higher, after it signed an $18 million agreement.
Auto parts maker Uno Minda and digital mapping firm CE Info Systems jumped 2.2% and 20%, respectively, after Goldman Sachs initiated coverage on the stocks with a “buy” rating and Street-high price targets.
The more domestically focussed small- and mid-caps gained 0.61% and 0.95%, outperforming the benchmarks.
Despite the rise, investors must reduce their return expectations, given the high valuations and likely moderation in earnings growth across most segments in the market, Tata Mutual Fund’s Padiyar said.
Indian shares opened marginally higher on Thursday, led by private sector banks after positive commentary on the sector from Macquarie, while a drop in pharma stocks capped gains. The NSE Nifty 50 was up 0.06% at 23,531.30, while the S&P BSE Sensex added 0.17% to 77,477.91, as of 9:27 a.m. IST.
Private bank index rose 0.5% and was the top sectoral gainer by percentage. Kotak Mahindra Bank and City Union Bank rose 2.2% each after Macquarie upgraded the two lenders to “outperform” from “neutral”.
Analysts expected the benchmarks to trade near current levels, ahead of first-quarter results and the union budget, both due next month.
Seven of the 13 major sectors logged losses. Pharma stocks dropped 0.7%, dragged by heavyweight Sun Pharma.
The drug maker dropped about 2%, after its Dadra facility received a warning letter from the US drug regulator, summarising violations concerning current manufacturing practices. The NSE Nifty 50 shed 0.18% to 23,516, while the S&P BSE Sensex added 0.05% to 77,337.59.
Both the indexes rose about 0.3% each to hit all-time highs at the open before surrendering gains.
There will be bouts of profit booking at record high levels and elevated valuations, analysts said.
From here on, it’s going to be about identifying specific stock opportunities with steady growth outlook and valuation comfort, said Harsha Upadhyaya, chief investment officer and president at Kotak Mahindra Asset Management Company.