Sensex Touches a Historic Mark of 60,000 Points

The Sensex scaled the psychological 60,000 mark on Friday 24th September. After the stupendous 958 points rally in the Sensex on Thursday, the general expectation was that the Sensex would cool down on Friday. But a mix of heavy buying and short covering has taken Sensex beyond the 60,000 levels. Some numbers are actually amazing.

Since the lows of March 2020, at the peak of the pandemic, the Sensex has rallied by 134%. If you just look at the 9 months of 2021, the Sensex returns stand at an unbelievable 26.17%. But the biggest surprise is that the last rally of 5,000 points from the level of 55,000 to 60,000 on the Sensex, happened in 28 trading sessions flat.

There have been 3 critical factors that drove the rally in the Sensex.

A) Few people expected that the pandemic impact would be so severe on India in 2020. But, virtually nobody expected that the recovery from lower levels would be so stupendous. IIP is back to pre-COVID levels and GDP is also almost at pre-COVID levels.

Above all, the aggressive vaccination drive has inoculated over 85 crore Indians and promises to complete the full process for adults by December. That is absolutely possible at the current rate of 1.50 crore vaccines per day.

B) If economy is recovering, Indian corporates have become leaner and smarter. Cost cuts, debt reduction and inventory tweaks have been the big themes of the last 1 year.

Debt equity ratio is the lowest in the last 20 years for Indian corporates. Despite the rise in inputs costs, most companies have managed through better rightsizing of administrative costs and inventories.

C) The big punch came from the FED, which has given a rather ambiguous statement. The markets have interpreted the statement as a signal that the Fed is unlikely to act in the immediate future.

After all, with the Evergrande crisis in China and the impending debt ceiling meeting in October, the markets are almost certain that the Fed would remain indecisive. That is what, perhaps, really gave wings to the Nifty and Sensex.

Also Read :- What the FED Meeting Outcome Mean for Global and Indian Markets?