Markets posts biggest weekly gain in two months as benchmarks add 3% each

Softening bond yields, moderation in FPI selling boost sentiment; both indices are now up 6% from year's low, but still down over 12% from their record high levels seen last October

The benchmark Sensex and the Nifty rose for a third day on Friday led by gains in utility and banking shares to cap their third straight weekly advance. Both the indices rose 3 per cent during the week—their biggest weekly advance since May 15. Softening bond yields and moderation in foreign portfolio investor (FPI) selling boosted sentiment.

On Friday, the Sensex finished at 54,482 and the Nifty at 16,221, each gaining 0.55 per cent. From this year’s low on June 17, both indices are now up 6 per cent but are still down over 12 per cent from their record high levels seen in October 2021.

The latest rebound in the market is triggered by fall in commodity prices, particularly oil, which has eased inflation concerns and spared optimism that central banks will be less aggressive with monetary tightening.

"The rally has gotten stronger as crude prices have corrected, halving FPI sales compared to last week. However, this rally can fizzle out as corrections in commodities prices and tightening monetary policy are negative for the global economy, limiting earnings growth and valuation expansion. June 2022 earnings season will be the prime focus of the market, in the near-term," said Vinod Nair, Head of Research at Geojit Financial Services.
 

“The rise in the equity markets witnessed in the last few trading sessions is based on the assumption of moderation in inflation, and therefore rates. However, the actual inflation numbers will be released in the US and India in the coming week, and this number would be crucial in deciding the trajectory of the markets,” added Joseph Thomas, Head of Research, Emkay Wealth Management.    

FPIs on Friday sold shares worth just Rs 105 crore. In the past one week, daily FPI selling has been just a fraction of that seen during mid-June.

All sectoral indices closed higher during the week with Nifty FMCG and Nifty Realty emerging as the top gainers, with gains of 5.7 per cent and 5 per cent, respectively.