Markets rise to new highs on FPI flows

Friday’s rally was fuelled by strong foreign fund flows and favourable global cues, including encouraging US economic data.

The Sensex rose 1.26% to close at a record of 64,718.56 after scaling an all-time high of 64,768.58 in intraday trading. The Nifty, too, rose 1.14% to a record 19,189.05.

Foreign portfolio investors bought a provisional ₹6,397 crore on Friday. They were supported by domestic institutions that bought a provisional ₹1,198 crore.

India’s standout growth prospects have further brightened with the progress of the monsoon, supporting investor sentiments, analysts said.

View Full Image

“Stable economic growth, receding concerns about inflation and anticipation of the interest rate cycle peaking out are among the few reasons for the recent rally,” said Sushant Bhansali, chief executive of Ambit Asset Management.

The strong economic data from the US further encouraged the markets. The global support to the bullishness is coming from the US, which reported better-than-expected quarterly gross domestic product growth of 2% and declining weekly jobless claims, said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services.

This resilience of the US economy, which was not anticipated and discounted by the market, is the strongest pillar of support for the global markets, Vijayakumar said.

The gains in information technology (IT), autos, banks and financial services stocks helped drive the indices to new highs. The US economic data encouraged and led to buying interest in IT sector, while anticipation of strong monthly sales numbers drove auto stocks. Pharma also stood among the front runners. The rest of the sectors also saw handsome gains, except metals stocks which saw profit booking pull down the metals index. Mahindra and Mahindra emerged as the top Nifty gainer, followed by Infosys, IndusInd Bank, Sun Pharma, and Hero MotoCorp.

Stocks of all asset management companies saw strong gains of up to 15% as Sebi deferred a proposal on cutting the total expense ratio. The markets regulator had in May issued a consultation paper for capping expenses on mutual funds by including brokerage and securities transaction tax charges within the total charges.

Nifty Midcap 100 and Nifty Smallcap 100 indices also scaled fresh records and 52-week highs. Cash market volumes were higher compared to the last 10-day average.

Analysts expect the market momentum to continue in the near term. Deepak Jasani, head of retail research at HDFC Securities Ltd, said that the rally is being supported by liquidity and comfort with India as a growth market. Jasani expects the market gains to continue in the near term.

Bhansali believes Nifty should clock high-teen earnings growth for FY23-FY25, and valuations are still below long-term averages, making a case for the sustainability of the rally.

“There is a clear picture emerging that India has been showing strong resilience in all the growth parameters and are poised to do well going ahead,” said Amol Athawale, technical analyst at Kotak Securities Ltd.

With most global economies, including China, witnessing degrowth, Athawale said India has emerged as a green shoot in a bleak scenario. Hence investors are reposing strong faith in local stocks.

“Technically, a breakout continuation formation on daily charts and a long bullish candle on weekly charts support further uptrend,” said Athawale. For bulls, 19,050 and 19,000 would act as key support zones while 19,300-19,400 would be crucial resistance areas, added Athawale.

With continued FPI buying and low crude prices, the rupee also remains stable and is strengthening. Brent crude at $74.51 a barrel continues trading below the $75 a barrel level. The rupee, at 82.04 a dollar, closed almost two paise stronger, and experts expect the pair to trade within a narrow range of 81.85 and 82.3 on the spot during the next week.

Among key events that will influence the markets in July will include actual auto sales numbers reported by companies. The progress of the monsoon and declining concerns on El Nino impact remain crucial to support the market, and clarity will emerge by mid-July, said experts. The Q1 earnings season will also kickstart by then, and corporate results will have a bearing on the markets.

Updated: 01 Jul 2023, 12:54 AM IST