Closing over 32,000-level, even when valuations are high and fund managers are concerned, the market still expects good news going forward
Image: Danish Siddiqui/ Reuters
The BSE Sensex closed at 32,037.38, 232.56 points up, a record, while the National Stock Exchange Nifty 50 closed up by 75.60 points at 9,891.70 on Thursday. In the early trading session, the markets rallied with the hope that the Reserve Bank of India (RBI) would cut interest rates in the August 2 monetary policy outing. The 30-share index has rallied 2,000 points in just over two months since it first crossed the 30,000-level on April 26 this year.
Investors flocked to the markets on Thursday, confident that this time, the Monetary Policy Committee had no reason not to cut rates since retail inflation had also dropped to 1.54 percent in June from 2.2 percent in May, according to data released by the government. Meanwhile, industrial activity indicated by IIP also shrunk in May.
"A slew of macro-economic data at home and positive comments by the Federal Reserve chairwoman, Janet Yellen on future rate increases in the US, (also) spurred the 'risk-on' sentiment in the market," Karthikraj Lakshmanan, Senior Fund Manager - Equities, BNP Paribas Mutual Fund said. Investors are happy. There is now a feeling that the market rally is sustainable for some time to come. “Frankly, it is difficult to understand why the market is so euphoric. It is already high at a historical P/E of 23.5. This is exactly the time when investors should ideally stay away from the market but sadly many investors might just take it as a cue to get into the market,” said a fund manager.