Broader market logs best two-week gains in 3 years

The broader market indices registered their best two-week gains since the post-COVID rally of 2021 on the back of strong inflows from retail investors amid rising confidence in the stability of the new coalition government.

The return of foreign portfolio investors (FPIs) and anticipation of Budget announcements are the other major factors that have been driving gains across the market, experts said.

The BSE midcap index has risen 7.5% in two weeks and the BSE smallcap gauge has given an 8.3% return. This is the best two-week performance of the two indices since February 2021. In the same period, the benchmark indices, Nifty and Sensex, have risen more than 4% each.

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These four indices closed at their highest-ever levels on Friday. The Nifty ended 0.3% higher at 23,465.60 points while Sensex rose 0.2% to close at 76,992.77 points.

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FPIs were buyers in Indian equities in the last six sessions. On Friday, they bought `2,175.86 crore worth of shares, according to provisional data. Domestic institutional investors bought shares worth `655.76 crore.

Market experts believe the outperformance of the broader market may continue in the near-term, but cautioned investors about expensive valuations. Investors should remain careful about any negative news flow as the downside in the broader market could be significant due to the premium valuations, analysts said. They recommended investors to balance their portfolio by adding fairly-valued largecaps even if broader markets continue to outperform in the near future.

“When liquidity comes in, especially from retail investors, it is midcaps and smallcaps which benefit the most. This trend can continue going ahead as well. But valuations are too expensive. So, any negative event can trigger major corrections,” said Ambareesh Baliga, an independent market analyst.

Sharing similar views, VK Vijayakumar, chief investment strategist at Geojit Financial Services, said, “There is buying in fairly-valued largecaps, but the reason why the broader market is outperforming is because of the sustained flows from mutual funds. This will continue in near term.”

Shares of real estate, consumer discretionary and consumer durables were among the biggest gainers in the last two weeks. Market participants attributed this to investor’s anticipation of announcements in the Budget.

The BSE Realty index was the biggest sectoral gainer in the last two weeks as it jumped 10.5%. The sectoral indices of the automobile, consumer durables and consumer discretionary rose 8-10%.

All the sectoral indices on the NSE and BSE ended higher in these two weeks. The Nifty PSU Bank Index was the biggest underperformer with 1.1% gains, as the coalition government at the Centre is expected to affect the sector the most. Among other underperformers were metals, private banks, and oil and gas companies.

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