It took nearly seven months for the Nifty to cross its earlier record level of 18,887.60 hit on December 1 last year.

Domestic market witnessed a correction for the first three months of 2023, but rebounded sharply since the beginning of April. Strong buying from foreign institutional investors (FII), improving domestic macroeconomic conditions, better corporate earnings and reasonable valuations led a sharp rally of over 11% in Nifty since its March lows.

Also Read: Nifty hits all-time high, crosses 18,900; here’s why market is rallying today

“Strong institutional flows, healthy macros and robust earnings growth drove domestic market towards its new highs. Even the current valuations are reasonable at 19x one-year forward PE which at previous peak had touched a high of 24x” said Siddhartha Khemka, Head of Retail Research, Broking and Distribution, Motilal Oswal Financial Services.

Meanwhile, since its previous record high hit in December last year, auto giant Tata Motors and FMCG major ITC have been top contributors for the rally in Nifty.

Tata Motors and ITC both have rallied more than 30% each since December 1, 2022. In terms of points, ITC has been the top contributor followed by Larsen & Toubro, HDFC Bank, Tata Motors, HDFC and Axis Bank during the period.

While ITC has jumped over 36%, Tata Motors share price has rallied over 33% since December 1, 2022. Other major index contributors include Larsen & Toubro is over 14%, HDFC Bank up 4.6%, HDFC up 4.5% and Axis Bank up 8.09%.

Bajaj Auto surged 25.15%, ONGC gained 16.4%, PowerGrid Corporation of India and Britannia Industries rose 15% each, while IndusInd Bank and Titan Company added 14% each during the same period.

On the contrary, index heavyweights Reliance Industries and Tata Consultancy Services (TCS) have fallen 7.2% and 4.8% since the Nifty hit its previous record level.

Analysts expect the strong momentum in the market to continue with autos, FMCG and financial sectors support the indices at higher levels.

A critical reason behind strong performance of domestic equities has been sustained inflow of foreign capital. The foreign portfolio investors (FPI) have invested nearly ₹86,000 crore in the Indian market since April this year, as per data from NSDL.

The Indian market received the highest equity inflow of $3.1 billion among Emerging Markets in June.

“Indian equities continue to outperform both emerging and developed economies, helped by strong FPI equity flows, pick-up in mutual fund equity flow, benign crude oil prices, continued demand traction with signs of rural and capex cycle recovery, and the optimism and euphoria around Indian PM’s visit to the US,” said Antique Stock Broking.

Indian equities are trading at 19.5x 1-year forward P/E multiple as against a long-term average of 18.4x.

“With monsoon kicking in and RBI taken a rate pause, the strong momentum in earnings is likely to continue. Thus at current valuations, market is expected to continue its upmove and remain buoyant,” Khemka said.

Catch Live Market Updates here

Updated: 28 Jun 2023, 01:40 PM IST