 "Sensex hits 60k mark after 4 months amid oil slump, revival of FPI inflows")
The Sensex extended its gains to the fourth straight session on Wednesday, reclaiming the 60,000 mark after four months. Meanwhile, the Nifty notched up gains for a seventh day in a row --its longest gaining streak since October 2021.
The slump in crude oil prices and the revival in foreign portfolio investor (FPI) flows are underpinning the sharp recovery in the markets from this year’s lows on June 17. Both the Sensex and the Nifty have rallied more than 17 per cent since then. The latest surge is showing little signs of fatigue even as valuations once again have reached expensive territory.
The Sensex gained 418 points, or 0.7 per cent, to end the session at 60,260 on Wednesday, closing above the 60,000 mark for the first time since April 5. The Nifty, on the other hand, settled at 17,944, with a gain of 119 points, or 0.6 per cent.
Oil prices hit a six-month low on Wednesday, slipping below $93 a barrel. From their March highs, oil prices have fallen 40 per cent. The fall in crude oil prices boosted investor sentiment as oil forms a chunk of India’s import bill.
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India’s retail inflation eased to a five-month low of 6.7 per cent in July from 7.01 per cent in June. However, consumer inflation continues to be above the Reserve Bank of India’s target of 6 per cent for the seventh consecutive month.
Sustained buying by FPIs is largely driving the markets higher, said experts. Since July, overseas funds have pumped in over $3 billion into domestic stocks.
Easing commodity prices, improved monsoon, and hopes that India will be an outlier in a year of global economic slowdown have improved the outlook for the country vis-à-vis other emerging markets (EMs).
“Markets, at some point, realised that worries about inflation and interest rate hikes were overdone. The quarterly results of some of the key sectors like financials and capital goods have been quite good. Moreover, the disruption of commodity prices due to the Ukraine war has eased. Investors are not unduly worried about geopolitical tension unless it escalates and there is some buying on account of that," said U R Bhat, co-founder of Alphaniti Fintech. "The inflation in India has started coming down. The consensus is that it has peaked. If inflation comes down much faster than expected, then there will not be much of a case for hiking rates further,” Bhat said.
The drop in bond yields, both in India and the US, from June levels has also made the risk-reward more favourable for equity markets.
“Markets are less than 4 per cent off their lifetime highs. Nifty continues its relentless rise and is currently outperforming global markets. Though there are no signs of a reversal, the current uptrend is mature,” said Deepak Jasani, head of retail research, HDFC Securities.
News reports that China may deploy more stimulus to shore up its ailing economy also boosted sentiment. Chinese Premier Li Keqiang asked officials from six key provinces, which account for 40 per cent of the country's economy, to initiate pro-growth measures after data for July showed that consumption and output grew slower than expected.
Investors continue to vacillate between concerns about aggressive rate hikes by the US Federal Reserve and robust earnings and are waiting for Federal Reserve’s minutes for further clues.
The market breadth was strong, with 1,960 stocks advancing and 1,460 declining. Close to four-fifths of the Sensex constituents gained. Bajaj Finance gained 3.28 per cent and gave the biggest boost to the Sensex. The telecom sector index gained 1.8 per cent, the most among sectoral indices.