Nifty and Sensex Hit Record Highs on Banking Surge; FMCG Flat

Benchmark indices Nifty and Sensex rallied to a fresh all-time high on July 29, extending gains for the second session in a row, buoyed by a sharp rally in banks and strong liquidity in the market.

At about 9:20 am IST, the Sensex was up 0.44% at 81,688 and the Nifty was up 0.43% at 24,942. The market breadth favoured advances, with approximately 2,328 shares rising, 532 declining, and 135 remaining unchanged.

"Strong retail participation and foreign institutional investors turning net buyers on Friday helps maintain the positive mood in the market," Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said. He added that investors have now shrugged off the capital gains hike announced in the Budget 2024 and are entering the market at every dip.

DIIs bought ₹18,856 crore worth of shares and sold shares worth ₹16,082 crore. Meanwhile, FIIs purchased ₹18,201 crore in shares and offloaded equities worth ₹15,655 crore during the trading session.

ICICI Bank was in focus in today's session after reporting robust Q1 earnings over the weekend. Brokerages remain largely bullish due to the bank's superior asset quality, loan-to-deposit ratio (LDR), and margins compared to peer lenders.  Morgan Stanley analysts expect the stock to perform well post-Q1FY25, citing ICICI Bank's return on assets (RoA) as being above normalised levels, with room to absorb potential margin normalisation.

The fear gauge rose on July 29, with India VIX rising to 12.7, up 4.5%. Meanwhile, broader markets outperformed benchmarks, with BSE Midcap and BSE Smallcap indices climbing up to 0.6% and 1.3%, respectively.

Bathini said that the mid and smallcap companies are exhibiting their earning visibility and from a medium to longer-term basis, they're fairly valued. There might be froth in some stocks but it is not possible to paint with the same brush for all these mid and smallcap companies.

Among sectoral indices, Nifty Bank edged higher by almost a% supported by gains in ICICI, SBI, and IndusInd Bank. Energy and IT indexes followed, rising 0.9 and 0.8% each.

The FMCG index was the only dampener as it fell 0.2% led by Tata Consumer Products who is slated to announce its earnings on July 30.

"After a gap-up opening Nifty can find support at 24,900 followed by 24,850 and 24,800. On the higher side, 25,000 can be an immediate resistance, followed by 25,100 and 25,200," Deven Mehata of Choice Broking said. "The charts of Bank Nifty indicate that it may get support at 51,200, followed by 51,000 and 50,900. If the index advances further, 51,500 would be the initial key resistance, followed by 51,700 and 51,800," he added.

Shares of public sector undertaking (PSU) banks were prominent in Monday’s intra-day trading, with the Nifty PSU Bank index surging by 3% on the National Stock Exchange (NSE). This rise was fueled by a strong rally in shares of Punjab National Bank (PNB), Indian Overseas Bank (IOB), Bank of India (BoI), Punjab & Sind Bank, and Bank of Baroda (BoB).

By 10:08 am, the Nifty PSU Bank index had gained 3.03%, making it the top performer among sectoral indices, compared to a 0.3% gain in the Nifty 50. The PSU Bank index reached an intra-day high of 7,500 but remains 7.4% below its record high of 8,053.30, achieved on June 3, 2024. Meanwhile, the Nifty 50 index set a new high of 24,980.45 in intra-day trading.

The asset quality of Public Sector Banks (PSBs) showed positive trends during FY 2023-24. Both gross non-performing assets (GNPA) and net non-performing assets (NNPA) fell to their lowest levels in a decade. Additionally, the Capital to Risk-Weighted Assets Ratio (CRAR) stayed comfortably above the regulatory requirement. This improvement is credited to concerted efforts to enhance asset quality, adopt digitalization, and implement strategic reforms at various levels.

PNB, BoI, BoB, Uco Bank, and IOB each rallied over 3%. State Bank of India, Canara Bank, Union Bank of India, Indian Bank, and Central Bank of India also saw gains, ranging between 2 to 3%.

Looking ahead to FY 2024-25, the outlook appears promising as the Indian economy is expected to maintain its growth momentum. The government's focus will continue to be on promoting sustained, equitable, and inclusive growth by emphasizing digitalization, ease of doing business, infrastructure development (including renewable energy), and financial inclusion.