Indian stock markets extended gains for the second consecutive session, with Sensex and Nifty trading higher on Thursday, even as oil prices remained elevated and the rupee hovered near record low levels after crossing the 95.7 mark for the first time ever on Wednesday.
Sensex surged more than 800 points to cross 75,400, while Nifty 50 rose 283 points to 23,695 on Thursday. This came as India VIX, which measures market volatility, dropped 4% to 18.68.
Bharti Airtel shares were the top gainers on the Sensex after the telecom giant’s Q4 earnings impressed Dalal Street. Adani Ports, Tata Steel, Zudio-parent Trent, Bharat Electronics, Power Grid, Maruti Suzuki, L&T, Zomato-parent Eternal and a few other stocks gained around 1% each. Bucking the trend, IndiGo shares declined around 1%, while IT stocks including TCS, HCLTech and Tech Mahindra traded in the red with marginal losses.
The optimism was broad-based, with the Nifty Smallcap 100 and Nifty Midcap 100 indices gaining up to 0.7% each. Sectorally, the Nifty Pharma and Nifty Metal indices gained more than 1% each to emerge as the top gainers, while Nifty IT declined over 1%.
What lies ahead?
Continuous rupee depreciation is becoming a major macroeconomic threat for the economy, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He highlighted that the year began with the rupee at 90 against the dollar, and since then it has steadily depreciated to the current level of 95.70. If crude oil prices remain elevated for an extended period, the rupee could weaken to 100 against the dollar, he said.
“The other major drag on the rupee is the sustained selling by FPIs in the Indian market. Money is moving into markets like the US, Japan, South Korea and Taiwan, which are performing very well. As long as these markets continue to outperform India, FPIs are likely to keep selling Indian equities, which, in turn, will further weaken the rupee,” the analyst said.
He added that the situation may improve only if the Strait of Hormuz reopens and crude oil prices decline, or if the AI trade that is attracting foreign flows into global technology leaders loses momentum, although there is no clarity on when that may happen.
“Sustained depreciation of the rupee has negative implications for the market. Imported inflation will rise, and margins of companies dependent on petroleum-based inputs will be impacted. Exporters, however, will benefit. Pharmaceuticals will remain a safe bet since demand for medicines is relatively inelastic, and the sector will also benefit from rupee depreciation. Textiles, too, are likely to gain. IT, despite being a potential beneficiary of a weaker rupee, may continue to remain under pressure due to the Anthropic shock,” he said.
Rupee declines
Rupee declined 8 paise to 95.74 against the US dollar in early trade on Thursday. This comes a day after the Indian currency hit an all-time low of 95.795 against the American greenback. “Markets are closely watching expected government measures aimed at curbing imports and supporting the rupee amid pressure from elevated crude prices and rising import bills.
Despite intermittent recovery attempts, sentiment remains cautious as the rupee continues to trade under pressure near lifetime weak zones,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities.
He sees the rupee to range between 95.45–96.00 in the near-term.
Oil prices
Oil prices inched slightly higher up, with Brent crude trading above $106 per barrel. WTI Crude, meanwhile, rose above $101 per barrel. This comes as the Iran-US conflict sees no resolution, leading to the prolonged closure of the Strait of Hormuz, a narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman that handles over 20% of the world’s daily oil and gas shipments.
US President Donald Trump said preventing Iran from obtaining nuclear weapons is the “only thing that matters”. “I think about one thing: we cannot let Iran have a nuclear weapon. That’s all,” the US president told reporters at the White House before boarding a plane to China. He also said that the growing financial pressure inflicted on Americans by the war on Iran is “not even a little bit” motivating him to make a peace deal with Tehran. “I don’t think about Americans’ financial situation. I don’t think about anybody,” he said.
Despite brief attempts, a long-lasting resolution to the month-old conflict in the oil-rich Middle East continues to remain elusive, and the existing ceasefire continues to turn fragile as leaders of the two countries fail to agree on a peace agreement.
FII selling continues
Foreign institutional investors (FIIs) continued to remain net sellers of Indian equities, offloading shares worth Rs 4,703 crore on Dalal Street on Wednesday, according to NSE data. This marked the seventh consecutive session of selling by foreign investors. While this does not reflect their activity on Thursday, persistent FII selling typically weighs on sentiment.
Global markets
The optimism on Dalal Street mirrored the overall optimism in global markets. In Asia, Japan’s Nikkei, Hong Kong’s Hang Seng and South Korea’s Kospi rose slightly, although China’s Shanghai Composite slipped into the deep red.
European markets had closed in the green yesterday, with France’s CAC, UK’s FTSE Germany’s DAX rising up to 0.75%. Wall Street indices also closed in the deep green, with tech-heavy Nasdaq gaining more than 1%.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of The Economic Times)
