Bulls back on D-Street: Indices gains 4% in the past 5 trading sessions

A resurgence of foreign flows has propelled the domestic markets, with the benchmark indices gaining more than 4 per cent in the past five trading sessions. Global investor appetite for risk assets is seen improving amid hopes that inflation has peaked and central banks may not tighten monetary policy as aggressively as earlier thought.  

The Sensex gained 284 points, or 0.5 per cent, on Thursday to end at 55,682, its highest close since June 3. In the past five sessions, the index has rallied 2,266 points, or 4.2 per cent — its longest winning streak since early-March. The Nifty closed at 16,605, with a gain of 84 points, or 0.5 per cent. From this year’s low on June 17, the Nifty is now up nearly 9 per cent.

The turnaround in market sentiment is underpinned by improved foreign flows. On Thursday, foreign portfolio investors (FPIs) bought shares worth Rs 1,799 crore, the provisional data provided by the stock exchanges showed. In the previous three days, FPIs invested Rs 7,012 crore, Rs 1,059 crore, and Rs 220 crore, respectively, in the domestic markets, according to the NSDL data. This has helped the monthly FPI tally turn positive for the first time since September 2021.

“There is a feeling that the worst of inflation has been dealt with. Inflation resulted from the rise in crude oil and commodity prices, and both have tempered a bit. If inflation comes down, interest rates may not be as aggressive as initially thought. There will still be some need for a hike, but it won't be that aggressive,” said U R Bhat, co-founder, Alphaniti Fintech.

On Thursday, Brent crude oil fell close to 4 per cent to trade at $105 per barrel. Over the last five weeks, Brent crude has corrected about 14 per cent. The fall in crude oil prices prompted the Indian government to cut recently imposed windfall taxes on fuels and scrap a levy on petrol exports.

Barring four, all the Sensex constituents ended with gains. IndusInd Bank was the best-performing Sensex stock and rose 7.8 per cent. Bajaj Finance gained 3.3 per cent.

“The banking results so far have been quite good, and bad loans seem to be under reasonable control. The demand for credit going up gives some of these larger banks pricing power,” said Bhat.

The Indian market has moved lockstep with the US markets this month, with both gaining around 5 per cent each. Recent gains by the S&P 500 have led to investors believing that corporate earnings will hold up against inflation, and that equity markets are past their worst phase of volatility.

The latest run of gains in the market belies investor sentiment. A global fund manager survey by Bank of America (BofA) revealed that investor expectations for global growth and profits were at all-time lows, and investors’ pessimism was at “dire levels”.
 

Apart from rate hikes, the unwinding of monetary easing, continuing disruptions in global supply chains, and recession fears keep investors worried. The impact on commodity prices due to the war in Ukraine and China’s zero Covid policy has dampened investor sentiment.

The partial resumption of gas supplies by Russia through the Nord Stream pipeline on Thursday gave some relief to investors. The pipeline was shut for repairs, fuelling fears that Russia might cut supplies altogether. Russia had slashed the flow of gas ahead of the maintenance.

“We maintain our cautiously optimistic stance and expect volatility to remain high, with more Nifty heavyweights announcing their earnings in the following sessions. Meanwhile, there'll be no shortage of trading opportunities, and participants should focus more on buying quality stocks from the sectors, which are trading in sync with the benchmark,” said Ajit Mishra, VP of research, Religare Broking.

The market breadth was strong, with 1,944 stocks advancing and 1,408 declining.