Nifty regains 16K mark amid easing inflation worries; Sensex up 427 points

Indices end at highest level in nearly a month

The benchmark Nifty50 index reclaimed the 16,000 mark on Thursday after 19 trading sessions following an improvement in risk appetite on optimism that the monetary tightening by the US Federal Reserve and other central banks might not be as aggressive as earlier projected.

A sharp fall in Brent crude oil and other commodity prices has helped assuage concerns over soaring inflation and led to hopes of improvement in corporate profitability. Global oil prices have declined nearly 15 per cent in the past one week.

 

The Nifty gained 143 points, or 0.9 per cent, to close at 16,133 on Thursday, while the Sensex settled at 54,178 with a gain of 427 points, or 0.8 per cent. This was the highest close for both the indices since June 10. The two indices, after plunging to 15,293 and 51,360, respectively, on June 17 — the lowest level since May 2021 — have rebounded 5.5 per cent.

“The weakening of commodity prices comes as a relief for India’s twin-deficit worries. Recent fiscal action makes us more confident of the government meeting deficit targets and maintaining capex. The current account deficit is still a worry, though large INR moves are unlikely. GDP impact of higher rates should be largely offset by continued housing momentum,” said Jefferies strategist Mahesh Nandurkar and Abhinav Sinha in a note.

During the 14 trading sessions since June 17, the Sensex and the Nifty have ended in losses on only five occasions, of which in four sessions the fall has been more than half a per cent. Reduced intensity of selling by foreign portfolio investors (FPIs) have helped the markets stabilise.

On Thursday, FPIs sold shares worth Rs 925 crore. In the past fortnight, the average daily FPI selling is less than a third compared to the preceding fortnight, when it was nearly Rs 3,500 crore per day. The moderation in FPI selling comes on the back of a sharp drop in bond yields both in the US and India on signs of inflation cooling off.
 

“After the initial shock, due to the sudden escalation of Russia-Ukraine conflict, global commodity prices across the board have started declining along with freight rates, which weaken the structural inflation argument due to commodity prices. Also, the feared wage-spiral conditions are unlikely given the softening outlook for job market going ahead as growth moderates,” said Vinod Karki, equity strategist at ICICI Securities.

“The May-end cut in fuel duties, and likely capping of oil prices in the current range, should imply that the RBI’s trajectory of inflation to decline from current 7 per cent to 6 per cent is likely. We expect further policy rate hikes to be limited to 75-100 bps in this cycle,” the Jefferies note added.

Reports that China's Ministry of Finance is considering allowing local governments to sell $220 billion of special bonds also buoyed global metal stocks. The BSE Metal index rose 4.5 per cent and was the best performing sectoral index on the BSE. The market breadth was strong, with 2,198 stocks advancing and 1,099 declining. More than two-thirds of the Sensex stocks rose.

“Buoyancy across global indices and short-covering in local stocks helped the Nifty and the Sensex to close above their psychological levels. After the recent sell-off, valuations are now off their peak, giving investors some room to pick and choose stocks that are fundamentally sound, despite the prevailing negative sentiment,” said Shrikant Chouhan, head of equity research (retail), Kotak Securities.