Stocks at new high; volatility jumps too
₹2,926.05 crore even as domestic institutional investors (DIIs) sold ₹192 crore worth of shares. Though the indices closed a tad lower each, they posted closing records, with the Nifty gaining 1% to 21,654.75 and the Sensex 0.98% to 72,038.43. The indices have risen for four straight sessions.
Direct retail volumes aren’t reported daily. The Nifty and the Sensex have now clocked annual returns of 19.6% and 18.4%, respectively. Interestingly, the last two months accounted for the bulk of this, thanks to heavy FPI inflows during November and December.
The Nifty has run up 14.83% and the Sensex by 14.07% from the closing of 18,857.25 and 63,148.14, respectively, on 26 October. That means 76% of the Nifty’s annual rally happened in the last two months. The latest leg of the rally has taken valuations past historic levels, with the Nifty trading at a one-year forward price to earnings (P/E) multiple of 19.9 times versus the five-year median of 17.97, with the Sensex P/E at 20.56 times against a historic 18.77 times median.
The Sensex one-year forward is, in fact, near a two-year high. Valuations jumping in such a short period has caused the Vix to rise 5.99% to 15.56 on 27 December, the highest reading since 15.58 on 22 February despite Wednesday’s rise. A rise in Vix increases the price for buying protection or hedging, through Nifty or Bank Nifty put options.
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