Markets create new records on earnings surge, liquidity

Mumbai: Markets made fresh records their new home as the Sensex on Monday settled at 32,515 and the Nifty 10,077, riding on tailwinds of strong corporate earnings amid expectations of an interest rate cut by the Reserve Bank.

The rally mirrored strength in most Asian indices. European shares ruled high too despite heightened tension over North Korea's missile programme.

The 30-share Sensex settled at the new high of 32,514.94, up 205.06 points, or 0.63 per cent. This has breached the previous closing record of 32,383.30 hit on July 27.

The gauge had lost 73.42 points in the previous session on Friday.

The 50-issue NSE Nifty hit an all-time high during the day. It settled up 62.60 points, or 0.63 per cent, at a fresh life high of 10,077.10, breaking its previous record of 10,020.65 recorded on July 26.

"Good results from index heavyweights continue to add liquidity while the country's largest PSU bank's interest rate cut decision attracted investors to the banking stocks on expectation of more peers to follow the trend. Moderation in inflation to below RBI's target of 4 per cent heightened the expectation of rate cut during the next monetary policy," said Vinod Nair, Head of Research, Geojit Financial Services.

The largest lender, State Bank of India, was on the top of the pack, up 4.46 per cent, after it slashed interest rate on savings account deposits by 50 bps to 3.5 per cent on balance of up to Rs 1 crore.

Expectations are building that the RBI would take note of the softening inflationary trend and ease policy at its upcoming meet on Wednesday. Inflation has since dropped to record low.

Investors also continued to keep faith in the quarterly corporate earnings story and this optimism rubbed off on the indices.

Shares of Larsen and Toubro surged by 2.85 per cent after the company posted a 46 per cent cent jump in consolidated net profit for the June quarter.

The BSE consumer durable goods starred in the rally by surging 1.86 per cent, followed by metal and PSU.

A similar story played out in broader markets.

Traders said risk sentiment improved by strong liquidity amid pumping of sufficient funds by foreign as well as domestic institutional investors and widespread buying by retail investors after more blue-chip companies came out with better-than-expected first quarter earnings figures.

DIIs bought shares worth a net Rs 424.67 crore while FPIs net sold shares worth Rs 223.12 crore on Friday, as per provisional data.