Sensex hits 50,000 mark for the first time in history!

Sensex hits 50,000 mark for the first time in history!

Last updated: 21 Jan, 2021 | 07:07 am

Sensex hits 50,000 mark for the first time in history!

Fastest 5,000-point rally

The Sensex has breached the 50,000 mark for the first time ever, helped by the fastest 5,000 point rally in its history. The journey from 45,000 to 50,000 was completed in 48 days beating the previous 115-day rally from 15,000 to 20,000. The table below shows how much time Sensex has taken to breach various milestones since the index touched the 5,000-mark for the first time ever in February 2006.

What’s driving the rally?

  • Favourable global cues: US President Joe Biden was sworn into office on Wednesday. Last week,  he had laid out a $1.9 trillion stimulus package proposal to boost the economy and speed up the distribution of vaccines.
  • Good corporate earnings: Sensex heavyweights TCS, Infosys, HDFC Bank, Bajaj Finance have all reported better-than expected results in the Oct-Dec 20 period. In this period, top companies are expected to see a robust recovery after the impact of Covid-19 affected the numbers in the last two quarters. 
  • Expectations from Budget 21:  Hopes of bold economic reforms in the upcoming budget and sustained buying by foreign institutional investors is keeping the investors' sentiment bullish on equity markets.
  • FII flows: As per data from NSDL, foreign portfolio investors have pumped in about Rs 14,750 crore in the Indian equities in January so far.

What to expect going forward?

This is a liquidity driven rally. While the markets are soaring higher and higher, valuations are getting even more expensive. The economy is yet to recover from the impact of the pandemic. According to estimates, Nifty is trading at a very heavy premium of more than 15% to its long-period average. These levels are clearly unsustainable in the long-run, while the gush of liquidity and along with low-interest rates could continue to take the indices higher in the near-term. 

The focus would now be on the Union Budget. If the government announces any new levy of fresh taxes or surcharges, it could dampen the spirits in the market. Apart from this, lower-than-expected earnings, geopolitical risks and overhang of Covid-19 also pose risks to the market.