The Indian stock market recorded sharp gains on Monday, with Sensex and Nifty extending their rise for the fourth consecutive session as heavy rainfall revived monsoon hopes, FIIs turned net buyers and other factors further boosted investor sentiment.
Sensex jumped over 521 points to close at around 78,285 while Nifty 50 gained nearly 160 points to end the session at 24,430. The sharp gains added more than Rs 2 lakh crore to the total market capitalisation of all companies listed on the NSE, pulling it up to Rs 482 lakh crore.
HDFC Bank shares surged more than 3% to lead gains on the Sensex, while Mahindra & Mahindra (M&M), Bharat Electronics (BEL), Reliance Industries, ICICI Bank and Bharti Airtel gained around 1-2%. Bucking the trend, Kotak Mahindra Bank shares dropped around 4% to lead losses on the benchmark index.
Broader markets also hovered in the green. Nifty Smallcap 100 and Nifty Midcap 100 indices gained 0.8 and 0.5% respectively. This came even as India VIX, which measures market volatility, inched higher to 11.85.
Sectorally, Nifty Auto, Nifty Realty, Nifty Oil & Gas and Nifty Consumer Durables indices jumped 1-2% each to lead gains, while Nifty PSU Bank dropped nearly 1%. The overall market breadth, however, was bearish, as 1,769 stocks declined on the NSE while 1,578 advanced, and 115 remained unchanged.
Here are six factors that are boosting market sentiment today.
1) Heavy rainfall revives decent monsoon hopes
Indian equities earlier last week faced strong defence at higher levels as a patchy start to the monsoon prompted profit-booking near key psychological levels. However, various parts of India saw heavy rainfall over the weekend, with the India Meteorological Department (IMD) placing several cities, including Mumbai on red alert, reviving hopes for a decent monsoon season.
“Investors will closely track the progress of the monsoon season, given its implications for rural demand, agricultural output, and inflation trends,” Bajaj Broking had said.
2) FII buying
Foreign institutional investors remained net buyers of Indian equities on Friday, purchasing shares worth more than Rs 1,355 crore on Dalal Street, according to provisional data available on NSE. According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, the revival of monsoon and FIIs turning buyers last Friday are positives for the market in the near-term.
3) Iran-US ceasefire hopes hold
Iran has begun a procession through its capital, Tehran, for the funeral of the late Supreme Leader Ayatollah Ali Khamenei. Authorities have shut down streets, airspace and daily life for the mourning, which began Saturday and will end Thursday as the 86-year-old Khamenei is buried at the Imam Reza shrine in Mashhad, his birthplace.
Meanwhile, no new escalations have been reported as the US presses ahead with negotiations aimed at fully reopening the Strait of Hormuz. The peace efforts thereby continue to boost investor sentiment.
4) Oil prices fall below $72/barrel
Oil prices dropped nearly 1% to fall below $72 per barrel on Monday, continuing to hover near the pre-war levels as the peace efforts continue to hold well so far. OPEC+ has agreed a further increase in output targets by 188,000 barrels per day from August, on top of similar increases for June and July.
Meanwhile, ships are passing through the Strait of Hormuz, with 160 vessels reported from Monday to Saturday last week.
5) Bond yields drop
US Treasury yields dropped, further boosting equity market sentiment. The yield on benchmark US 10-year notes fell to 4.461% while the 30-year bond yield fell to 4,969%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, dropped to 4.112%. Falling bond yields typically make bonds less attractive to investors, which in turn can lead to an uptrend in markets.
6) Buying in heavyweights
Heavyweight shares of HDFC Bank jumped more than 3% after the Q1 business update of India’s largest private lender impressed the bulls of Dalal Street. The sharp gains recorded by the counter significantly contributed to the uptrend in the benchmark indices Sensex and Nifty. Other heavyweight stocks like Reliance Industries, ICICI Bank, Bharti Airtel and M&M also contributed to the gains.
What lies ahead?
From this week onwards, the market will start responding to the Q1 results, which will begin on July 9 with IT heavyweight TCS, Vijayakumar highlighted. He said that Q1 results overall are likely to be subdued due to the energy shock and macro headwinds triggered by the conflict in West Asia.
“Now that the macro headwinds are behind us, the market will be looking forward to the potential trends in the rest of the year by taking cues from Q1 results. In Q1, financials and autos are likely to outperform while IT will report subdued results and modest guidance. Financials will report better-than-expected results driven by impressive credit growth of 17%. NBFCs in gold loans and consumer financing will report revenue and profit growth of around 20%. In automobiles, commercial vehicles and two-wheelers will report impressive numbers since the Q1 sales in these segments have been better-than-expected,” he said, adding that buying on dips would be a good strategy in the near term.
Technical view on Nifty
Despite the consecutive weeks of gains, Nifty has only reached April’s highest closing figure, from where a multi-month downtrend had begun, said Anand James, Chief Market Strategist, Geojit Investments. Friday’s pullback is good in a way because it keeps the uptrend away from premature collapse, as the oscillators had begun to show signs of exhaustion, he added.
“We will continue to see 23,800 as a strong downside marker while we chase short-term upsides with an eye on 24,170. Expect whipsaw moves to 24,600, which may not be sustainable initially. However, a close above 24,400 could render the trend stable for a 24,800-25,250 move,” according to James.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
