A slew of global factors drove the market to record highs on Tuesday, with the Sensex gaining over 413.45 points, or 1.01 per cent, to end at an all-time high of 41,352.17 points.
The sentiments were boosted after the US suspended planned tariff hikes on Chinese imports, scheduled for December 15 and on reports that UK Prime Minister Boris Johnson would change the law to guarantee that the Brexit transition phase is not extended beyond end-2020.
Analysts said there could be more foreign buying, as India's weightage in the MSCI Emerging Market Index is set to rise, as Finance Minister Nirmala Sitharaman on Friday confirmed implementation of the Budget announcement of raising the foreign portfolio investment limit in a company from 24 per cent to sectoral foreign investment limit from April next year.
Foreign institutional investors (FIIs) started pouring money into Indian equities lately.
FIIs have invested net Rs 850 crore in the equity segment, as per data available on the NSE. In December, however, FIIs have net withdrawals of Rs 3,000 crore.
The market has been stalling but has discounted the easing of global worries such as Brexit and US-China trade war. Amid easy monetary policy and improvement in liquidity, the market should continue with the current momentum.
Stock prices reflect everything and the momentum seen now is based on expectations from the finance minister, which are elevated after the corporate tax cut and sector-specific packages, analysts said.
"Positive global sentiments, buoyed by easing trade war tensions between the US and China, continue to pump market. Economic growth remains on the lower side while risk appetite of investors are gradually improving on expectation of further steps from the government in the upcoming budget to revive consumption and attract investments," said Vinod Nair, Head of Research at Geojit Financial Services.
On Tuesday, metal stocks gained on US reaching an in-principle trade deal with China. Brokerage firm CITI Research said global steel prices are likely to rise on signs of China easing monetary and government policies and a demand upswing in India also pushed metal stocks higher.
Domestic steel prices have increased by 4-6 per cent from the lows in October 2019, led by gradual recovery in domestic demand and regional prices. A warm winter in China has resulted in better demand from construction, as reflected in inventory de-stocking and low exports. With higher prices and coking coal-led cost deflation, margins should recover partially in the third quarter of fiscal 2020 and considerably in the fourth quarter of FY20, said Kotak Institutional Equities.
