FPI buying powers Sensex, Nifty to new closing highs
MUMBAI : Buying by foreign and domestic funds catapulted equity benchmarks to record closing highs on Friday, as investors bet that cooling inflation will lead to a prolonged pause on interest rates, a positive for corporate profitability. The Nifty and the Sensex each closed up 0.74% at 18,826 and 63,384.58, marginally shy of their record intra-day highs of 18,887.6 and 63,583.07 on 1 December.
Foreign portfolio investors (FPIs) purchased stocks worth a provisional ₹794.78 crore, while domestic institutional investors (DIIs) purchased shares worth ₹681.33 crore on Friday. Accounting for Friday’s provisional figure, FPI buying so far this fiscal year stands at ₹72,670 crore, while DII buying is at a modest ₹3,240 crore.
Friday’s rally was broad-based, with the Nifty Midcap 100 hitting a record high of 35,198.05. Aggregate market capitalization hit an all-time high of ₹292.74 trillion.
Analysts expect the Nifty and the Sensex to test their 1 December peaks shortly since they have broken psychological resistance levels of 18,800 and 63,000, respectively.
“Falling inflation and healthy economic data along with consistent FII (foreign Institutional Investors) buying cheered domestic sentiments,” said Siddhartha Khemka, research head (retail), Motilal Oswal Financial Services. “Indian equities are set to make an all-time high on the back of a strong rally in global markets, supported by healthy domestic cues. Sectors like pharma, healthcare, and insurance will remain in focus.”
The Reserve Bank of India made a second pause in the rate cycle earlier this month as inflation eased. Retail inflation at 4.25% in May grew at the slowest pace in 25 months on easing crude prices and the combined effect of RBI’s rate hikes since May 2022. Lower cost of funds improves corporate profitability prospects.
FPI buying has fuelled a 12% rally in the Nifty from its low of 16,828.35 on 20 March through 18,826 on 16 June. India’s gross domestic product is expected to grow at 6.5% in FY24 on the back of strong domestic demand.
The India Meteorological Department has projected a normal monsoon at 96% of the long-period average.
“The domestic market rebounded with strong buying in banking, pharma, and consumer stocks, along with positive cues from global markets,” said Vinod Nair, head of research at Geojit Financial Services. “The US market’s optimism was bolstered by better-than-expected retail sales, reflecting the robustness of the economy. Furthermore, jobless claims remain elevated, and a decline in import prices raised hopes for a prolonged pause in interest rate hikes by the Fed, contradicting their announcement of potential future rate hikes made the previous day.”
The smart rally induced by FPI and DII buying catapulted the rupee to a four-and-a-half-month-high of 81.94, while the benchmark 10-year bond yield closed lower by 0.6 basis points to 7.03%.
Stocks that hit fresh 52-week highs on Friday include Nestle ( ₹23,175.25), UltraTech Cement ( ₹8,432.15), ITC ( ₹455.60), and Titan ( ₹2,960).
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Updated: 16 Jun 2023, 11:53 PM IST
