Regardless of the immediate concerns such as spiralling crude oil prices threatening inflationary pressure and the capital market regulator Securities and Exchange Board of India’s missive to exchanges and brokers to collect additional margin money from traders and big investors in view of “abnormal” surge in two equity benchmarks the Sensitive Index of Bombay Stock Exchange and Nifty of National Stock Exchange market market participants continued to buy and build up high positions taking these two benchmarks to new record highs today ahead of the tabling of the government’s Economic Survey for 2018-19 in Parliament by the finance minister Mr Arun Jaitley.

The Survey projecting GDP at 7.5 per cent (upside) for the next fiscal cheered the market. The current pre-Budget rally is the biggest one in over 12 years. Since 1 January Sensex surged 6.7 per cent breaking previous record of 5 per cent in 2006.

Analysts say bulls are defying all odds on huge liquidity support from domestic as well as foreign portfolio investors or FPIs who have stepped up buying since the start of 2018. The Sensex and Nifty accelerated once highlights of the Economic Survey reached Dalal Street.

Market participants say the projections suggesting improvement in economic macros or fundamentals which are in line with the forecast by IMF and World Bank spurred the upside momentum in Sensex and Nifty which closed for the day at 36,283.25(+232.81) points and 11,130.40(+60.75) points increasing 0.65per cent and 0.55 per cent respectively.

Encouraging earnings for December ended quarter by corporate groups and financials after a gap of several quarters is now being seen as a “definite” turnaround in the economy of India. The Nifty Bank ended with marginal gain of 0.19 per cent at 27,498.45 (+52.80) points mainly due to gains in private lenders’ shares. Nifty PSU Bank was down 1.41 per cent at 3,704.75 (-52.95) points.

The bull rally is fuelled by FPIs in January who until Thursday last were net buyers in domestic shares worth Rs 9,518.3 3 crore (Thursday’s Rs 965.60 crore) while DIIs in the current month are net sellers in equities worth Rs 965.67 crore.

The reversal of roles between FPIs and DIIs is not new to Dalal Street. Analysts point out that foreign funds had triggered several big rallies in the past while their domestic counterparts played a second fiddle because supply of domestic liquidity then was short.

Auto, private lenders, IT and select heavyweights such as L&T were among the top contributors to today’s fresh record breaking rally. State-run banks including State Bank of India suffered more profit booking.
The Economic Survey’s observation confirming stretched valuations ~ it specifically mentions the equity market valuations should have been on lower side ~ particularly ahead of the Budget 2018-19 presentation on Thursday increased the possibility of likely correction in the equity benchmarks if expectations of all sections of the society are not fully met by Mr Jaitley’s budget.

The aggressive positions build-up in futures and options forced Sebi to send letters to exchanges and brokers asking them to collect additional margin money from investors as well as FPIs. Accordingly, exchanges and brokers have forwarded Sebi’s genuine concern on over-bought positions to investors.