Encouraged by strong FII inflows and soft crude oil prices, the Sensex once again reclaimed the sixty thousand mark on Monday. Senses closed at 60,115.13 with a gain of 0.54% on Monday
Global cues also remained favorable as the dollar index declined by the rupee. also to strengthen
Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities Limited said that “strong global market cues opened the rally in local benchmark indices as Sensex closed above the crucial 60,000 mark on buying in IT and realty stocks.” In recent sessions, Chouhan said that the fall in global crude oil prices and the US dollar index has encouraged domestic investors to increase their equity exposure.
Market confidence has also grown strongly in the Indian economy. Analysts said the domestic economy is witnessing strong consolidation and this is driving continued growth in Indian equities.
Vinod Nair, Head of Research, Geojit Financial Services, said, “The 15.5% year-on-year growth in bank credit during August suggests that the economy is recovering rapidly.”
The dollar-denominated rupee ended 6 paise lower at 79.52, helped by a fall in the US dollar index, buying by FPIs (foreign portfolio investors) and soft crude.
Brent is trading around $93.46 a barrel, which is significantly lower than the level of $120 a barrel seen in June. FPIs were also net buyers of equity value 2049.65 crore on Monday, suggested provisional data on NSE. FPI has already been a net buyer After being a net seller during the first half, equity worth Rs 64322.25 crore in the second half as on September 9
However, even experts remain a little cautious.
Pankaj Pandey, head of research, ICICIDirect, said market participants should be wary of rising inflation and draining liquidity from the system. The rising inflation risk and therefore the withdrawal of ultra-easy monetary policy by global central banks (primarily the Federal Reserve) could lead to a sharp rise in bond yields, allowing the riskier asset to correct faster, Pandey said.
India’s inflation number stood at 7.0% in August from 6.7% in the previous month.
Market analysts expect a worse-than-expected CPI and IIP prints to react to the Nifty, which on Monday closed above 17900 for the first time in four months.
Sudip Bandyopadhyay, Group Chairman, Inditrade Capital, said, “The market may react adversely to the disappointing data in both cases. However, with so much money, the recovery will also be swift. In fact, the trend is going by, I wonder. It won’t happen if we improve in the beginning and get well tomorrow (Tuesday).”
Bandyopadhyay said many emerging market funds were looking to cut investments in China and some of that money was finding its way into Indian stocks. India is a relative outperformer, expected to register 6-7% growth this fiscal year amid fears of a slowdown in the US and Europe, as increased inflation makes central banks like the Fed and ECB more bullish.
Before the release of IIP and CPI figures, Geojit K Nair had said, . Due to rising food prices, the domestic inflation figures are projected to rise gradually from 6.7% in July, which could add volatility in the short term.
Raising a red flag on increased inflation, Bank of Baroda Chief Economist Madan Sabnavis said, “This high inflation will work in favor of greater aggression from the RBI in terms of hike in the repo rate. The base effect with additional pressure from food products in case of reduction in production will certainly keep inflation elevated for the next three months.”
The BoB had forecast a 6.7% increase in August retail prices against 7% and July IIP to 5.4% against the actual 2.4%.
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