Stock markets soared to new heights on Thursday as the central bank’s dividend bonanza sparked hopes of lower interest rates, easing election jitters and boosting investor confidence. The market saw a staggering increase of ₹4.2 trillion overnight, making investors wealthier and lifting India’s stock market to a closing high of $5.05 trillion.
Foreign investors, who had been selling for the past two months, returned to the market in full force, with Foreign Portfolio Investors (FPIs) buying shares worth ₹4,670.95 crore on Thursday. This influx of foreign investment, coupled with the central bank’s unexpected dividend transfer of ₹2.1 trillion, led to a surge in blue-chip stocks like Reliance Industries Ltd, ICICI Bank Ltd, State Bank of India Ltd, Mahindra & Mahindra Ltd, and Bharti Airtel Ltd.
The record dividend payout is expected to lower government borrowings, boost capital expenditure, and stimulate economic growth. Market experts anticipate the rally to continue in the lead up to the Lok Sabha election results on 4 June.
Bank stocks, in particular, saw a significant boost following the central bank’s dividend announcement, with investors expecting the payout to help the government meet its fiscal deficit target, reduce borrowing, and bring down interest rates. The rally is expected to be driven by financial stocks in the coming weeks, with banks and rate-sensitive sectors like autos likely to lead the charge.
While the market hit new highs, the fear gauge India Vix remained relatively stable, indicating investor confidence in the rally. Analysts predict that the market will continue to climb past the 23,000 mark in the Nifty before the election results are announced.
Overall, the surge in market capitalization reflects India’s economic resilience and strong growth outlook, attracting significant retail inflows and boosting market sentiment. Despite concerns about high valuations, market experts remain optimistic about the market’s performance in the coming months, with expectations of sustained growth and positive earnings trajectory for Nifty companies.
