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The benchmark index touched a historic level of 20,000 in today’s session, as it scaled to an all-time high of 20,008.15. This high is even more important than the previous touch-and-go level of 19,991.85 on 20 July 2023 as global cues were not supportive this time.
The is comfortably trading above 104 for the last few sessions and even rallied to over 105 on Friday, which was the highest level since mid-March 2023. A rise in the dollar index is a bad sign for equity markets as it denotes that money is flowing out of emerging markets toward the dollar.
The second reason this triumph over 20K is important is the index surged to an all-time high despite soaring oil prices. Currently, WTI futures is trading at around $87.9 per barrel which is around the highest level in 2023. As India imports approx. 80% of its oil consumption, rising oil prices increase our trade deficit which is definitely not what we want.
The third reason is the weak rupee. The dollar-rupee pair is trading at around 82.9 and recently touched a high of around 83.2. In fact, I don’t know how many of you know this but on 15 and 16 August 2023, the pair witnessed a mammoth rally to 83.46 in the offshore market but as our market was closed on these days, we didn’t feel the heat. Before our currency market opened, the pair reverted to mean, else that would have been a new all-time low.
How can one forget the scorching heat of inflation? In July 2023, India’s CPI rose unexpectedly to 7.44%, from 4.87% in the preceding month. This even surpassed a very high expectation of 6.4%.
So what’s driving the market?
The most prominent reason is the unprecedented pace of investors’ contribution to the equity market, all thanks to increasing financial literacy. We witnessed many block deals in the previous month as biggies found it to be a good time to dump their holdings but all of the supply got absorbed by our Indian Institutions and individual investors.
The recent data from AMFI shows that the SIP rose to the highest level in August 2023, at INR 15,814 crore. This sheer amount of money has to be deployed somewhere and mutual funds cannot sit in cash as the fear of underperformance is real. It becomes difficult for a fund to justify its cash position when the benchmark indices are scoring newer highs.
In fact, recent data by CDSL (NS:) also showed demat account openings hitting a 19-month high in August 2023, with the total accounts crossing 12.6 crore. When such a wave of money comes into the market, we see a runaway market, like the current times.
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