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Sensex Reclaims 60k-mark; Key Factors Behind The Bull Run –

Indian benchmark equity indices continued the bull run for fourth straight session on January 5, with Sensex reclaiming the psychological 60,000-levels after the correction since October last year.

The 30-share barometer touched an intraday high of 60,332.72, while the broader NSE Nifty scaled 17,944.70.

On 20 December, Sensex and Nifty hit a low of 55132.68 and 16410.20 and since then they advanced 9.3% each. Analysts attribute gains in equities to improvement in key macroeconomic numbers, better than expected GST collections, improvement in auto monthly numbers and banking credit growth. Here’s a look at the key drivers:

GST Collection in December: Investors cheered the GST collection, which was above Rs 1 trillion for six month in a row. The GST collection for December month stood at 1.29 trillion, up 13% from a year ago. “Coupled with economic recovery, anti-evasion activities, especially action against fake billers have been contributing to the enhanced GST. The improvement in revenue has also been due to various rationalization measures undertaken by the council to correct inverted duty structure”, the finance ministry said.

RBI Rate hike delay: According to analysts, RBI is unlikely to hike rates in its February bi-monthly policy amid restrictions by many states due to surge in Omicron infection cases.  “WIth the recent surge in Covid-19 cases and widening of restrictions leading to heightened uncertainty, it is increasingly unlikely that the MPC and RBI will commence with policy normalisation in February 2022 itself, unless inflation provides an acutely negative surprise. However, the likelihood of the latter is muted at this point”, Aditi Nayar, chief economist at ICRA, said in a note.

PMI expansion continues:  India’s manufacturing PMI showed expansion for the sixth straight month, consolidating to 55.5 in December from 57.6 in November. This was despite a surge in covid cases and inflationary pressures. Indian manufacturers continued to see a sharp rise in new work and production.

Banking sector performance: In last three sessions, six banks reported loan growth for the December quarter, which shows that the economic recovery on its path despite the covid cases surging. Bandhan Bank reported 11% year on year loan growth, HDFC Bank loan growth surged 16% while Federal Bank and Indusind Bank reported 12% and 10% growth, respectively. Yes Bank reported 3.9% loan growth and CSB Bank loan growth was at 11.55%,

Record exports: India’s exports in December rose 37% on an annual basis to $37.29 billion. Outbound shipments during April-December 2021 crossed $300 billion. According to media reports, the government expects that country’s exports will cross $400 billion this fiscal.

Monthly Auto sales numbers: Commercial vehicle segments continued to recover as the auto firms reported December sales numbers in line with estimates. According to analyst, the revival momentum will continue. “We continue to remain positive on the sector despite near-term challenges of COVID-19 related disruptions and chips shortage. The PV segment, both for 2W and four-wheelers, is expected to remain strong amid COVID-19, as a preference for personal transport. Rural demand is expected to drive sales of tractors, farm equipment, and benefiting companies having a strong rural and semi-urban presence”, said Sharekhan in a report to its investors.

SEBI stricter rules for IPO: In December, SEBI cleared the rules for tightening IPO norms. These rules will address gaps like conditions for the objective of IPOs, utilization of proceeds from the share sales, price bands, anchor investors’ lock-in period and the size of the stake a majority shareholder may sell on listing day.

IT Firms expected to report robust December quarter: IT firms expected to report strong revenue growth in a seasonally weak growth. Analysts say that the sequential growth rates will range from 2.6-6%. However the picture is not pretty on EPS growth with a range of decline of 15% to growth of 11% on year on year comparison. “we expect strong headcount addition, high fresher intake, high attrition, muted TCVs even as ACV will be strong. HCLT, Wipro and TechM will lead the growth among large-caps and LTI among mid-caps. We are still constructive on the space although the returns will moderate from here. Infosys, HCLT and Mphasis are our top picks”, Kotak Institutional Equities said in a note to its investors.

Return of foreign investors: After selling nearly $5 billion in November and December, FII’s have turned net buyers in the last two sessions with buying $400 million in equities after improvement in key macro-economic and monthly GST and Auto numbers. Domestic investors continued to buy in equities with over Rs 30000 crore in November and December each. So far this month, they bought around Rs 1336 crore.

Continued surge in property registration: Property sale registration in Mumbai saw a 70% rise to 111552 units in 2021 from the previous year and 45% more than the pandemic year of 2019. The western suburbs’ sales contribution was 53%, followed by the central suburbs’ contribution of 31% in 2021. About 83% of sales concentrated in the up to 1,000 sq. ft housing segment, indicating the continuing demand for larger homes, according to Knight Frank report.