Nifty-50 Reaches 20,000 Mark Amidst a Rally Driven by Domestic Liquidity:
The Nifty-50 index of the National Stock Exchange achieved a historic milestone by surpassing the 20,000 mark for the first time but concluded slightly lower at 19,996.35, gaining 176.40 points or 0.89 percent. This remarkable rally marked the seventh consecutive session of gains, primarily driven by domestic fund investments. However, analysts issued warnings regarding the liquidity-fueled surge, with certain segments of the broader market appearing overbought.
The market rally received a boost from equity mutual funds, which recorded a significant increase in net inflow, reaching Rs 20,245 crore in August, compared to the Rs 7,626 crore observed in July. This surge in inflow represented the highest levels in the past five months, as reported by the Association of Mutual Funds in India.
The benchmark Sensex of the Bombay Stock Exchange (BSE) also closed above the 67,000 mark at 67,127.08, gaining 528.17 points or 0.79 percent. It’s noteworthy that BSE’s all-time high of 67,619.17, set in July 2023, remains unchallenged. The market rally on Monday extended to the broader market, with the NSE’s Nifty Midcap 100 rising by 1.14 percent and the Nifty Small-cap 100 gaining 1.33 percent.
A wide range of sectors participated in Monday’s rally, led by banking, automotive, power, metal, FMCG, and realty sector stocks. Key heavyweight stocks such as Reliance Industries (1.02 percent), HDFC Bank (0.59 percent), Adani Ports (7.10 percent), and Adani Enterprises (3.68 percent) played a significant role in the Nifty’s achievement of this new landmark. Adani’s gains followed the G-20 summit announcement of new rail-port connectivity through the Middle East to the US. BSE’s market capitalization reached a new all-time high, exceeding Rs 324.26 lakh crore, with a notional gain of over Rs 3.32 lakh crore.
Market experts noted that this rally is driven by liquidity, urging investors to exercise caution due to elevated valuations, particularly with the Nifty-50 trading at a FY2025 P/E ratio of over 18 times, considered expensive.
Additionally, small and mid-cap stocks are even more expensive in many cases. Notably, the Nifty-50’s surge has been primarily propelled by local investments in recent months, as foreign portfolio investment flow has been relatively subdued, partly due to limited global interest in Asia funds given China’s weak outlook, which carries significant regional weight.
Ashishkumar Chauhan, MD, and CEO of the National Stock Exchange, commended the Nifty-50’s progress over the past 27 years, since its inception at an initial value of 1,000. He highlighted the trust placed by Indian and foreign investors in India’s capital markets. Chauhan also noted that more than 7.5 crore unique PAN numbers representing investors are registered with the NSE, indicating that 5 crore households directly invest a portion of their savings in the equity market via the NSE.