Here are the key factors that helped Sensex end above 55,000

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Benchmark equity indices ended at a record high for the second straight session on Friday led by some positive domestic and global cues. Sensex claimed 55,487 for the first time in history and the Nifty 50 index topped 16,543 levels. “Buoyed by Inflation numbers, Indices galloped their way to new highs powered by the IT index as TCS together with biggies like Larsen & Siemens stole the show even as Midcaps remained subdued. FMCG names lent good support today to the Sensex which has vaulted from 50k in just seven months to endorse that the bull market is still firmly in place,” said S Ranganathan, Head of Research at LKP Securities.

The bulls are showing no signs of fatigue and here are the factors driving sentiments:

Macroeconomic data

Traders remained optimistic after National Statistical Office (NSO) reported that manufacturing sector, which constitutes 77.63% of the Index of Industrial Production (IIP), grew by 13% in June this year due to a low-base effect and good performance by manufacturing, mining and power sectors but the output remained below the pre-pandemic level.

IPO refund

Initial public offers of Deynani International, Exxaro, Windlas and Krsnaa Diagonstics, which raised around Rs 3500 crore, refunded the amount to investors who did not get the allotment. There are chances that such liquidity is again moving to secondary market.

“Enthusiastic retail participation has given momentum to the market enabling it to reach higher levels,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Firm global cues

The market stood bullish since the morning after the US’ indices Dow Jones and S&P 500 jumped to record closes for a third straight day on Thursday, with mega-cap technology stocks driving the market higher as investors warmed to jobs data showing the steady US. economic recovery. Meanwhile, European markets traded higher, UK’s FTSE 100 increased 22.58 points or 0.31% to 7,215.81, France’s CAC increased 13.19 points or 0.19% to 6,895.66 and Germany’s DAX was up by 40.32 points or 0.25% to 15,977.83.

The rally has global support with the Dow and S& P 500 setting new records, Vijayakumar added.

Robust Q1FY22 results

The top performer of the Nifty 50 pack Tata Steel reported a consolidated net profit at Rs 9,768 crore in the quarter ended 30 June 2021. The steelmaker had posted a net loss of Rs 4,648 crore in the year-ago period. On a sequential basis also, the steelmaker’s consolidated profit grew 34% Q-o-Q from Rs 6,644.15 crore in Q4FY21. India’s largest steel maker’s revenue from operations for the quarter in review jumped 109.5% to Rs 53,372 crore as against Rs 25,662 crore in June 2020 quarter.

Such strong performance by companies is making Nifty less expensive despite it being at a record high and this is visible from the fact that PE (price to earnings) of Nifty has moderated to 26.5x from 29x month on month basis.

A healthy feature of today’s rally is that it is led by high-quality blue-chips in performing sectors like IT, financials and telecom. IT majors like TCS, Infosys, Wipro and HCL Tech are leading from the front. Investors have confidence in IT since this segment is on an expansion cycle that is expected to last 3 to 4 years, said Vijayakumar.