Markets at fresh record high as investors risk appetite improves
Markets hit fresh record highs on Wednesday as risk appetite of investors improved with government announcing various incentives to boost manufacturing in India and uplift ailing sectors such as telecom and auto. The BSE Sensex gained 476.11 points or 0.82% at 58,723.20.. The Nifty was up 139.45 point or 0.80% closing at17,519.45.
“The Nifty crossed 17500 today reaching one more milestone. The fact that the breadth of the market has improved sharply over the last few days and that Nifty has moved up against negative global headwinds is reassuring. This could mean that India as a market could be less impacted by global turmoil going forward," said Dhiraj Relli, MD and CEO, HDFC Securities.
Markets in other parts of Asia-Pacific region were largely lower. Hong Kong’s Hang Seng index dropped 1.84% while Shanghai composite in China dipped 0.17%.
Domestic equities witnessed sharp rebound today with benchmark indices Nifty and Sensex recording fresh all-time highs despite weak global cues, said Binod Modi, head strategy, Reliance Securities.
“A strong rebound in foreign institutional investors (FIIs) flow in last two days (bought over ₹3000 crore equities in two days) augured well, which led Nifty to record fresh all-time high. Unlike developed markets, faster ramp-up in vaccination process and relatively lower daily caseload offer India an edge over other markets and therefore domestic bourses are resilient despite pressure in global equities," said Modi.
The Union cabinet on Wednesday approved a host of policy measures to provide relief to the cash-strapped telecom sector, including a four-year moratorium on payment of statutory dues by telcos and allowing 100% foreign investment through the automatic route. Telecom minister Ashwini Vaishnaw, at a press briefing, said the Union cabinet also approved nine structural changes and five process reforms which will bring a qualitative change in the sector.
The government has also approved production linked incentive scheme for auto, auto-component and, drone industry to enhance India's manufacturing capabilities.
Meanwhile, experts believe that retail inflation has set the tone for easing near-term pressures, ahead of the Reserve Bank of India monetary policy review meeting in October. Headline CPI inflation moderated to 5.3% in August.
According to Tanvee Gupta Jain, chief India economist, UBS Securities elevated CPI inflation seen over the past few months was temporary, more supply driven and, thus, potentially transitory. For the full year, she estimates CPI inflation to average 5.5%YoY in FY22 with core inflation slightly above 6%.
“While companies have started passing on the rising input costs to consumers (led by elevated and rigid domestic retail fuel prices, ongoing supply chain disruptions globally including the integrated circuit shortage, higher shipping rates etc) despite weak demand, the government announced administrative measures to soften the cost pressures (for instance, basic customs duty on palm oil was further reduced to 2.5% from 15% earlier. The global commodity prices also seem to have plateaued and could provide support over the coming months. Going forward, we think a calibrated reduction of the indirect tax component of retail fuel prices by the government can also help to offset some of these building price pressures," she said.