Foreign funds gusher helps Nifty scale 5k

MUMBAI: A day after Sensex galloped to its fastest 1000, the National Stock Exchange Nifty followed suit closing bang on the psychological 5000 mark for the first time.

The broader 50-stock index took 204 sessions since December 14, 2006, to ratchet up the 25% upmove from 4000 to 5000. The  Sensex added 27% — or nearly a Nifty at 3663.40 points — in the same period.

The Nifty was up 60.05 points or 1.22% at 5,000.55, an all time closing high. It struck an all time high of 5,016.40 in late trade. Nifty had earlier taken 213 sessions to move from 3000 to 4000.

The rally triggered by the Fed rate cut continued for the eighth session in a row.

Analysts said this can’t continue for long but then again, that’s a function of how much foreign flows keep gushing in.

“Usually we see just 2-3% difference between Nifty rolls and marketwide rolls. This signifies that people are getting into highly leveraged positions in stock futures. This market is driven neither by technicals and nor by fundamentals but purely by liquidity. I feel we are dangerously poised,” said Siddarth Bhamre, fund manager, derivatives, Angel Broking.

However, he feels since the liquidity driven market is even perceiving bad news as good news, one can not afford to sit on cash or go short.

“In this scenario, we are suggesting out-of-money call options. Also one must keep away from stocks which have run up heavily such as RNRL and JP Hydro,” he adds.

Markets across globe rallied as weak US economic data reinforced expectations for another interest rate cut from the Federal Reserve, following a steep half-point reduction to 4.75% last week.

The eight-day rally is second of the year, has been strongest ever as it has added 506 points on the Nifty between September 17 and September 27.

In the previous eight-day rally beginning August 23, the Nifty had gained 365 points from 4114 to 4479.

The Sensex is in the midst of its most productive rally in terms of points as it has added 1646 points in the past eight sessions. On Thursday it gained 229 points or 1.35% at 17,150.56, an all time closing high.       

It opened with upward gap of 138.22 points to 17,059.61. Its low for the day was at 17,018.56. It hit an all time high of 17,188.40 in late trade.

Sandeep Nanda, executive vice president, Sharekhan, says, "The last 1000 point rise has been short but sweet.

The higher than expected rate cut by the US Fed, coupled with India's strong domestic growth has been the trigger. Valuations while not cheap are still reasonable and further rate cuts and higher flows could boost the market further."

Nanda says that he prefers metals, capital goods and rate sensitive sectors such as banks.

Cues in F&O segment also suggest that the rally is on a strong footing and may continue unless there is some shock from global front.

Yogesh Radke, derivatives analyst, Edelweiss Securities, says, "Nifty on 5000 is a significant landmark and the good thing is that it's reached on good volumes.

The market is getting into uncharted territory and the fact that the October series has started with a premium shows that sentiments are bullish." Radke says though in absolute terms the rollover is lower than the 82% seen in the August Series, coming on a bigger base, this looks healthy.

The Nifty October series closed on Thursday with a premium of 8 points at 5008. The high premium and decent marketwide rollover of 79% augur well.

The interesting thing here is that Nifty Futures saw rolls of just 65% This is a good 15% lower than the market wide rollover of 79%.