Stocks rally over 1% on global cues

The market’s gains were led by Bharti Airtel, Tech Mahindra, IndusInd Bank, HCL Technologies and Tata Consultancy Services, which rallied between 2.94% and 3.38%.

View Full Image

Tech stocks were the biggest gainers ahead of the company earnings releases, as the favourable US economy boosted optimism about the sector. Except for consumer durables, all other sectoral indices saw smart gains, with metals, state-run banks, energy stocks and auto being top gainers.

Shrikant Chouhan, head of equity research (retail) at Kotak Securities Ltd, said, “The positive undercurrent in global markets had a rub-off effect on local equities, as investors resorted to short-covering after last week’s correction, helping key benchmark indices recapture their psychological levels”.

With China steadily lifting covid restrictions, there are hopes that demand may pick up, giving breathing space for the markets battling recession fears and higher interest rates, added Chouhan. However, markets may remain choppy as many of the worries are yet to subside, he said.

Investors will keep a watch on inflation data in the US, Europe, and India to be released during the week, said analysts. Further, Fed chair Jerome Powell’s speech on Tuesday could be important for global markets as it may throw some light on future action. Sectors like banking, auto and metals can witness some momentum, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd.

Traders speculated that an unexpected contraction in the US services activity and a slowdown in wage growth would temper the Federal Reserve’s rate hike aggression.

V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, said Friday’s US economic data is significant for the global markets. “All data point to a strong but cooling US economy, which indicates the rising possibility of a soft landing for the US economy. However, in India, the major drag has been the sustained FII selling. This is the data to watch. If this too turns, Nifty can break out on the upside”.

The dollar index declined below 104 as traders expected a less aggressive US Fed, and the US 10-year bond yield, too, softened. All signals are bullish, said analysts.

Rupee gained 36 paise to close at 82.36 a dollar due to weakness in the dollar index and strength in emerging market currencies, said Anindya Banerjee, vice-president of currency derivatives and interest rate derivatives at Kotak Securities Ltd. However, dollar demand from state-run banks did not let the pair drop further, added Banerjee, though, over the near-term, he expects the downward bias to continue due to risk-on sentiments.

The risk-on trade was reflected by a 2.5% decline in fear gauge India Vix to 14.65.

Market veterans remain bullish on India’s growth story and expect consistent inflows by domestic institutions and a revival of foreign portfolio flows.

Sunil Damania, chief investment officer at MarketsMojo.com, expects a revival in FII flows, which began in the second half of last year. “We feel IT will outperform financial services, given a decline in attrition, renegotiation of prices with customers and benefits of a weaker local unit,” Damania said.

“Given that India is slated to grow thrice as fast as global GDP this year, both domestic and foreign institutional inflows are likely to sustain through the year,” said Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers. “The Indian economy is in the best shape that I have seen in the past 14 years that I have lived in this country.”

Another positive for the markets is the expected strength in metals in the very short-term with China’s reopening.

“Metals can be a very short-term tactical play,” said Jyotivardhan Jaipuria, managing director at Valentis Advisors, who also expects Indian indices to underperform EM and global market peers in the short term.