The Indian stock market surged on Wednesday, with the Sensex and Nifty gaining up to 1%, driven by improved investor sentiment after the RBI Governor signalled that further rate hikes may be premature, alongside a rebound in South Korean equities and other supportive global cues.
Sensex jumped nearly 791 points to close at 76,991, while Nifty 50 gained around 198 points to end the session at 24,022. This comes as India VIX, which measures volatility in the market, dropped over 4% to 13.34. The sharp gains added around Rs 1.3 lakh crore to the total market capitalisation of all companies listed on BSE, taking it to Rs 476 lakh crore.
IndiGo and Trent shares gained around 4% each to lead gains on the Sensex, while Tech Mahindra, Bajaj Finance, ICICI Bank and Infosys shares jumped around 3% each. Shares of Maruti Suzuki, NTPC, Tata Steel and Bharat Electronics, meanwhile, declined nearly 2% each.
Broader markets, however, remained muted, with the Nifty Smallcap 100 and Nifty Midcap 100 indices closing with marginal gains. Sectorally, Nifty IT, Nifty Private Bank and Nifty Realty jumped around 2% to lead gains, while Nifty Metal and Nifty Auto closed with losses. Around 1,735 stocks advanced on NSE, while 1,566 declined and 95 remained unchanged.
Here are 6 key factors boosting market sentiment today:
1) RBI Governor douses rate-hike fears
RBI Governor Sanjay Malhotra signalled that talks around further rate hikes may be premature. He added that the central bank was watching for second round effects of higher oil prices on inflation in the broader economy before taking a call on rates. "We do not see signs of inflation generalizing yet," Malhotra said.
"If we wanted to prepare the market for rate hikes, we would have changed stance from neutral to restrictive," he added. The Reserve Bank of India's monetary policy committee kept interest rates unchanged at its meeting earlier this month, while maintaining the stance at "neutral".
2) Global cues
The Indian stock market crashed yesterday following a 10% plunge in South Korea’s Kospi amid concerns that valuations had become stretched after the market's strong rally. However, the Kospi rebounded today, jumping around 3%.
Hong Kong’s Hang Seng and China’s Shanghai Composite gained up to 0.3%, while Japan’s Nikkei slipped into the red. In Europe, the UK’s FTSE and France’s CAC traded in the green, while Germany’s DAX fell around 1%.
3) India-US trade deal hopes
The United States and India are "very, very close" to concluding a historic bilateral trade deal that will open the 1.4 billion-strong Indian market to American goods on reciprocal and mutually beneficial terms, US Deputy Assistant Secretary of State Bethany Poulos Morrison said.
Meanwhile, Union Commerce Minister Piyush Goyal met US trade representative Jamieson Greer as both sides pushed to finalise an interim trade deal ahead of July 24, when US’ temporary 10% tariff on imports from trading partners is set to lapse.
4) Oil prices fall below $77/bbl
Oil prices continued to decline, hovering near four-month lows as signs emerged that more oil tankers stranded in the Gulf since the start of the Iran conflict are preparing to move through the Strait of Hormuz.
Brent crude futures declined nearly 1% to $76 per barrel while WTI Crude futures fell more than 1% to $72 per barrel.
5) FII buying
Foreign investors remained net buyers of Indian equities for the third consecutive session, net purchasing shares worth Rs 18 crore on Wednesday amid the market crash.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said that the FII selling appears to have tapered off. This is positive for the market.
6) Buying in IT, bank stocks
The overall positive sentiment on Dalal Street was lead by heavy buying in heavyweight IT and private bank stocks. As a result, Nifty IT and Nifty Private Bank indices gained around 2% each. ICICI Bank and HDFC Bank shares gained up to 3%, while those of Axis Bank and Kotak Mahindra Bank were up more than 1%. Meanwhile, Infosys, Tech Mahindra and TCS shares gained up to 3%.
What lies ahead?
Globally, stock markets turned weak yesterday, triggered by a crash in semiconductor stocks, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. South Korea’s Kospi was down 10% and this spread concerns to other markets, too. Nikkei and Nasdaq corrected by 3% and 2.2% respectively. India was not much impacted; Nifty declined by 1.16% only, the analyst highlighted.
“In morning trade today Kospi has bounced back, pushed up by Samsung. Excessive volatility will continue in semiconductor stocks and markets like South Korea and Taiwan. Sharp rallies will trigger profit booking; sharp corrections will encourage buying. The profitability of these companies will continue to be excellent. However, concentration risks are high. This means high volatility will continue,” he added.
This excessive volatility is favourable to India which is growing at a steady pace, according to Vijayakumar, who added that the crash in Brent crude to below $77 has removed the macro headwinds for India. Rupee has stabilised. FII selling appears to have tapered off. This is positive for the market, he said.
“But the new concern is the poor monsoon which is deficient by 43% so far. There are concerns that this might impact India’s growth and corporate profits too, marginally. Investors can align their portfolios to adjust to this emerging threat. Sectors like FMCG and entry level 2-wheelers are likely to be impacted by decline in rural income. Pharmaceuticals with inelastic demand will be resilient and even outperform during a monsoon-deficient situation,” he added.
Technical view on Nifty
Technically, the undertone remains cautious as long as the Nifty trades below 23,950, said Rajesh Palviya, Head of Research at Axis Direct. He highlighted that a sustained move above this level could trigger a relief rally towards 24,100–24,150, while immediate support is placed at 23,780.
“A decisive breach below this support may accelerate profit booking towards the 23,600 zone. Although oversold conditions after the expiry session could support a near-term pullback, investors should remain watchful of global technology stocks, which are likely to continue dictating market sentiment in the near term,” he added.
(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)
