Markets
Sensex recorded the sharpest monthly gain in June since December
Summary
The 30-scrip bluechip index logged its best gains in six months since December 2023 driven by political continuity and renewed inflow of foreign funds.India's benchmark stock index, the Sensex, roared back to record the biggest monthly gain in six months, surging 6.9% in June. This impressive rally was driven by optimism surrounding the return of the Bharatiya Janata Party-led government and a positive global market environment.
Analysts attributed this upswing to policy continuity expectations under the new government and a renewed inflow of foreign funds. “The return of the BJP-led government is one of the major reasons for these stellar returns as it ensures smooth policy continuation in the country and recovery in global markets has been a catalyst for this upmove," said Ravi Singh of Religare Broking. He added that foreign institutional investors (FIIs) have been pumping funds back into the Indian market, further fuelling the uptrend.
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But experts also cautioned against excessive bullishness, suggesting there might be some profit-taking in the coming days. However, Singh predicts the Sensex to inch towards 81,000 by the end of the year, with the Nifty potentially hitting 24,900.
The strength of the rally is further underscored by the advance-decline ratio, which stood at a healthy 1.26 during the month. This indicates that for every stock that declined in price, there were more than 1.2 stocks that advanced. Notably, this ratio was the highest since April 2024, when it reached 1.28.
“We have noticed recently that the breadth has become narrower and more focussed towards the large caps. In the US markets also, we are seeing this phenomenon where indices are moving because of 4-5 companies," said Kunal Mehta, associate director, Equirus Wealth. But the good part with Indian markets is that it’s across sectors and mostly all sectors are participating in the upmove, he added.
All sectors ended in the green during the month, the information technology (IT) sector emerged as the leader of the June rally, delivering a stellar return of 11.3%. This was closely followed by the telecommunication and the consumer discretionary index, which registered gains of 10.9% and around 9% respectively. “Largely telecom, large financials, industrials and autos have outperformed. Now we are seeing IT and pharma also joining the rally. As mentioned it's more of a broad-based move rather than sector focussed," Mehta said.
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On the valuation front, the Sensex’s P/E ratio has slightly increased from 24.1 times on 30 June 2023 to 24.6 times, indicating a potential slight increase in stock valuation relative to earnings, which is offset by the growth in earnings per share (EPS) from 806 to 949. This EPS growth suggests that companies are generating more profit per share, which could be a positive sign for the stock market.
