Indian shares extend rally, end at fresh highs on financials boost

BENGALURU, July 3 (Reuters) - Indias blue chip indexes Nifty 50 and Sensex ended at fresh highs for the third consecutive session on Monday, aided by broad sectoral gains, with financial services in the lead.

The Nifty (.NSEI) rose 0.70% to 19,322.55, while the S&P BSE Sensex (.BSESN) gained 0.75% to close above 65,000 for the first time. Both indexes hit fresh record highs earlier in the session.

Financial services stocks (.NIFTYFIN) were among the top gainers on Niftys sectoral indexes, rising 1%. Index heavyweights HDFC (HDFC.NS) and HDFC Bank (HDBK.NS) gained 1.75% and 1.08%, respectively, after approving July 1 as the effective date of their $40 billion merger.

Several brokerages, including Haitong International, Nomura, and Macquarie expected further pick-up in credit growth and improvement in asset quality for financials in the June quarter.

Banks (.NSEBANK) hit a record high for the second consecutive session, while public sector banks (.NIFTYPSU) rose 3.61% and were the top sectoral gainers.

The rally extended to broader markets as well, with smallcaps (.NIFSMCP100) and midcaps (.NIFMDCP100) settling at an over 1-year high and a new closing high, respectively.

Analysts cited foreign inflows, steady earnings, monsoon revival and positive impact of HDFC merger as major triggers for the recent rise in domestic equities.

However, they cautioned investors to remain patient despite the sharp rise in benchmarks, citing lack of valuation comfort.

\“Valuation comfort is only in out-of-favour sectors and fresh positions will need to be built in these sectors,\” said Amit Kumar Gupta, founder and chief investment officer at Fintrekk Capital.

Among individual stocks, Reliance Industries (RELI.NS) rose over 2.5% to a six-month high after commencing production from third deepwater field in Krishna-Godavari D6 block, in collaboration with a local unit of British oil company BP (BP.L).

Meanwhile, Mahindra and Mahindra (MAHM.NS) and UltraTech Cement (ULTC.NS) hit record highs, after reporting strong monthly and quarterly sales growth, respectively.

($1 = 82.0355 Indian rupees)