Indian stock markets have had a remarkable week, driven by a combination of positive economic data, robust corporate earnings and buoyant global markets. Here we take a closer look at the reasons for the surge, the best-performing stocks and sectors, and the current market data.
Market Trends in June
Indian equity markets hit a historic milestone on June 14, with major indexes closing at record highs across the board. India’s benchmark market index, the Nifty 50, rose 55 points or 0.24% to close at 23,453.90, setting a new record high. The main market benchmark, the BSE Sensex, rose 139 points or 0.18% to close at 76,949.49, a few points below its 52-week high of 77,145.46. The gains reflect widespread optimism among market participants and underscore the resilience of the Indian economy.
The Nifty Midcap 100, which tracks the performance of mid-sized companies, showed notable strength by rising 527.30 points or 0.96 per cent to close at 55,179.55, indicating robust performance of mid-sized companies, often seen as a barometer of economic growth and investor confidence.
Moreover, the Bank Nifty index, which represents the banking sector, closed in positive territory, up 133.80 points or 0.27 percent at 49,980.50. The strength of bank stocks highlights the crucial role the banking sector plays in driving economic expansion and market sentiment.
These record highs reflect investor confidence and the underlying strength of the economy, marking a landmark moment for the Indian equity market.
What makes the stock market go up?
Indian Defense Minister Rajnath Singh’s announcement of the government’s ambitious goals for expanding defense exports and overall growth forecast for the Indian defense sector has contributed significantly to the recent market rally, especially in defense and shipbuilding stocks.
- Increase in defense exports: The government’s target of increasing defence exports to Rs 5 trillion over the next five years has boosted market optimism. This target has highlighted the growth and profitability potential of the defence manufacturing sector, leading to a surge in share prices of companies such as PTC Industries, Paras Defence and Space Technologies, BEML, Bharat Electronics, MTAR Technologies, Bharat Dynamics, IdeaForge Technologies, Zen Technologies and Astra Microwave Products. These stocks have risen by between 3% and 20%, reflecting investor confidence in future profitability.
- Investor sentiment and growth outlook: The announcement strengthened investor sentiment towards defence stocks on hopes of higher government spending, higher defence budget and growing export opportunities. The government’s focus on ‘Aatmanirbhar Bharat’ and self-reliance in defence manufacturing further strengthened the market outlook for these stocks.
Other reasons
- Markets are recovering: On the day of the announcement of the results of the Indian Lok Sabha elections, the market fell by 6% as Narendra Modi’s Bharatiya Janata Party (BJP) failed to win a majority in the parliament. The market quickly rebounded once it became clear that the BJP would come to power. After the drop, profit taking and value buying drove the Sensex and Nifty indices to new all-time highs.
- Strong economic indicatorsThe Indian economy has demonstrated remarkable resilience with better than expected GDP growth, robust industrial production data and subdued inflation. This favourable economic environment has boosted investor confidence.
- Strong corporate earnings: Many Indian companies, especially in sectors like IT, pharma, banking, etc., have reported strong quarterly earnings. These earnings reports have beaten market expectations, boosting stock prices.
- Global Market SentimentsPositive global market performance, including easing geopolitical tensions and signs of recovery in major economies such as the US and China, is having a ripple effect on the Indian market. The US Federal Reserve’s decision to pause interest rate hikes is also encouraging increased foreign investment in emerging markets, including India.
- Government InitiativesModi remaining in power and his party retaining key ministerial posts means the government can continue to focus on economic reforms, infrastructure development, and the policies it implemented during its two terms in power to attract foreign investment. This has played a key role in boosting investor exposure in the stock market. Initiatives such as the Production Linked Incentive (PLI) scheme, for example, have boosted the manufacturing sector, thereby lifting manufacturing stocks.
Best performing sectors in June
- information technology: The IT sector posted strong gains on the back of strong performance reports from leading players like TCS, Infosys and Wipro. Digital transformation and rising global demand for IT services boosted the sector’s performance.
- Pharmaceuticals: The pharmaceutical sector is benefiting from robust export demand and successful new product launches, with companies such as Sun Pharma and Dr Reddy’s reporting robust earnings.
- Banking and Financial Services: The banking sector is witnessing a revival driven by improving asset quality and robust loan growth, with large banks such as HDFC Bank and ICICI Bank leading the way with impressive financial performance.
- Consumer GoodsFMCG companies are performing well due to rising consumer spending and rising rural demand, with companies such as Hindustan Unilever and ITC reporting strong sales growth.
June’s best performing stocks
- TCS: TCS has been one of the top performers in the IT sector, benefiting from big contract wins and strong quarterly earnings.
- Reliance IndustriesReliance is making profits across its diversified portfolio, which includes retail and telecommunications.
- HDFC BankHDFC Bank’s strong financial performance and market leadership in the banking sector have boosted the bank’s share price.
- Sun PharmaSun Pharma is benefiting from strong demand for its products both domestically and internationally.
Market expectations
Major equity indexes Sensex and Nifty 50 opened at all-time highs on Thursday, followed by a strong showing in global markets, as a favourable US inflation report raised the chances of an interest rate cut by the US Federal Reserve.
Neeraj Sharma, vice president, technical and derivatives research at Ashit C Mehta Investment Intermediates said technically, the index is forming a bearish belt-hold pattern on the daily chart. Profit booking is expected if the index remains below 23,350.
“On the downside, the immediate support for Nifty is near 23,000, followed by the 34-day Exponential Moving Average (DEMA) support at 22,720,” Sharma said.
Om Mehra, technical analyst at Samco Securities, expects the short-term trend to remain neutral to positive unless the 22,200 level is breached. A pullback towards the 22,270-22,300 range could offer buying opportunities while a break above 23,500 could take the index closer to 23,650.
After multiple attempts in recent sessions, the price of the Nifty benchmark index finally breached the 23,300 level on a closing basis, said Sameet Chavan, head of technical and derivatives research at Angel One. However, a closer look at the daily chart reveals three small consecutive candlesticks indicating hesitation at higher levels and a notable lack of sustained buying throughout the week.
“Against this backdrop, the outstanding performance of small and mid-cap stocks in recent sessions has stood out, prompting traders to identify such counter names to take advantage of strong trending opportunities. That said, caution is advised in placing aggressive bets, especially in the current elevated market environment,” Chavan said.
Conclusion
The impressive performance of the Indian equity market over the past two days is a testament to the strength of the country’s economic fundamentals, corporate sector and global markets. As long as these factors remain favourable, the market is likely to continue its upward trend, providing ample opportunities to investors.
To know the key indicators to watch in June, read Forbes Advisor India’s stock market outlook.
