Indian stocks accumulated stellar returns this week; Sensex jumped 1,600 points

New Delhi: Indian stock indices closed Friday's trade on a steady note and closed this week on a flyer, defying the latest slump in global markets.

Sensex closed 8 points lower at 75,410 points, and Nifty closed 11 points lower at 22,957 points, both staying around their all-time highs experienced in the previous session.

By creating an unprecedented wealth of USD 1 trillion in just 6 months, both indices of the Indian stock market BSE and NSE have joined the exclusive USD 5 trillion club, defying the FII (Foreign Institutional Investors) pullout before the outcome of the Lok Sabha election on June 4.

Data shows this leg of the bull run is fuelled by domestic institutional, retail and HNI (High Net worth Individuals) investors as FIIs have pulled out at least Rs 28,000 crore from the market this month.

Market experts say, assuming market returns are in line with the last 10 to 20 years, and with the expectation of India becoming the third-largest economy by 2027, the market cap of BSE and NSE is expected to reach USD 10 trillion by 2030.

The consistent bull run in Indian stock indices - Sensex and Nifty -- continued and touched fresh highs on Thursday, reacting to Prime Minister Narendra Modi's assertion that the BJP-led alliance is on track to form the government for a record third term.

The prime minister also predicted that the margin of victory would be even broader.

Barring a little volatility, Indian stock indices have been firm over the past several sessions, supported by strong support from a majority of sectoral indices.

With the five phases of elections now behind us, it is widely expected by investors that the Narendra Modi-led government will come back to office with a comfortable margin for his third term. This also likely triggered fresh stock buying.

Softer-than-expected US consumer inflation in April a consistent moderation in inflation in India and the sooner-than-normal arrival of the southwest monsoon in India, as predicted by IMD, mainly buoyed Indian stocks lately. The southwest monsoon is likely to hit Kerala on May 31, a day before the usual normal date of June 1.

Last week, Sensex jumped about 2,000 points, on a cumulative basis.

During Tuesday-Friday this week, Sensex jumped about 1,500 points. On Monday, i.e., yesterday, the stock exchanges were shut for General Elections in Mumbai.

"Global market sentiments remained subdued as the recent US FOMC minutes suggest a continued hawkish stance on policy rates...Meanwhile, the domestic market is reaching new highs, with large caps playing second fiddle to the broader market rally, indicating sustained momentum in the short term. The BSE PSU index has experienced significant rerating due to strong performance and improved visibility, driven by PSU banks and defence stocks," said Vinod Nair, Head of Research, Geojit Financial Services.

Firm GDP growth forecasts with the country set to remain the fastest growing major economy, inflation at manageable levels, political stability at the central government level, and appreciable central bank monetary policy, have all contributed to painting a bright picture for the Indian economy in recent quarters.

Overseas investors have been remaining net sellers of Indian equities for the past several sessions. Interestingly, domestic institutional investors during the same period stayed net buyers, largely making up for the outflows by the foreign investors.

Shrikant Chouhan, Head Equity Research, at Kotak Securities, said, "The improvement in market sentiment over the past week suggests that market expectations surrounding the ongoing Lok Sabha elections have steadied. Furthermore, better-than-expected 4QFY24 earnings in some key pockets supported momentum."