Global cues, results, rains catapult equity markets

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SME Times News Bureau | 28 May, 2016
Positive global cues, combined with a fresh influx of foreign funds and healthy fourth quarter results, catapulted the Indian equity markets to their highest weekly close in the last three months.

Further, expectations of above-average monsoon rains, a rise in global crude oil and high-grade copper prices unleashed a relentless buying spree. These led both the key indices to their new six-month intra-day highs during the just concluded week.

Consequently, the wider 51-scrip Nifty of the National Stock Exchange (NSE) rose by 406.95 points or 5.25 percent to 8,156.65 points.

Similarly, the barometer 30-scrip sensitive index (Sensex) of the BSE surged by a massive 1,351.7 points or 5.34 percent to 26,653.60 points

On a weekly basis, the bank index rose 6.46 percent, followed by FMCG and IT indices, which gained 5.5 percent and 3.26 percent.

However, broad-based markets under-performed the headline indices. The mid-cap and small-cap indices gained only two percent and 1.5 percent.

Positive global cues such as recent data points from Germany and the US, which indicated accelerated levels of economic growth, lent a major fillip to the domestic markets.

The rise in US home sales data provided investors with hope of a continued recovery in the world's largest economy, even after a speculated interest rate hike in June.

Besides, European markets surged after Greece agreed to a deal to unlock a further 10.3 billion euro worth of loans from its international creditors.

"Bulls reclaimed gains on the Dalal Street; as the upbeat global environment gave traders a reason to cover their short positions," Dhruv Desai, director and chief operating officer of Tradebulls, told IANS.

"Markets, after a strong start, witnessed a pick-up in buying activity in recently beaten down stocks. foreign institutional investors (FIIs) turned positive for the week."

The upswing in global sentiment also allowed for a fresh influx of foreign funds. The stock exchanges data disclosed that FIIs bought Rs.675.13 crore worth of stocks during the week under review, shild domestic institutional investors (DIIs) purchased scrips worth Rs.1,914.11 crore.

Figures from the National Securities Depository Limited (NSDL) showed that the FPIs (Foreign Portfolio Investors) invested Rs.2,789.42 crore or $412.58 million in the equity markets from May 23-27.

Even a rise in global crude oil prices cheered investors. The Brent index-based crude prices surpassed the $50 mark for the first time this year.

"Market sentiments were further buoyed as crude oil advanced to $50 a barrel for the first time this year as US industry data showed a decline in stockpile," D.K. Aggarwal, chairman and managing director, SMC Investments and Advisors, told IANS.

The domestic cues such as healthy quarterly results, strong rupee and prediction of an above average monsoon rains boosted investors' risk-taking appetite.

"The recent upward movement seen in the domestic market can be attributed to a number of factors such as better-than-expected earnings, on expectations of a good monsoon and a rise in new order books from sectors such as roads, railways, power and power distribution," Aggarwal said.

Investor sentiment was upbeat, especially after a string of better-than-expected quarterly results from heavyweights like ONGC, GAIL and L&T.

"On the heels of positive signs, Indian stocks helped themselves to a lagged response to positive Q4 numbers released so far," Anand James, chief market strategist at Geojit BNP Paribas Financial Services, told IANS.

"The less-pessimistic reaction to weak bank numbers also suggested that investors were inclined to believe that banks are closer to the beginning of a recovery cycle."

Furthermore, an upgrade of India-based equities by a global investment bank Morgan Stanley to 'Overweight' from 'Equalweight' status, boosted the buying sentiment.

Moreover, positive comments on economic reforms made by high-raking government officials to mark the completion of two years of Prime Minister Narendra Modi-led NDA government, restored investors' confidence.