Reacting to the US Federal Reserve’s hawkish stance, equities in the US and European markets corrected on Wednesday, followed by the Asian markets, which began Thursday’s trading session in the red. But as the day progressed, Sensex and Nifty recovered more than its emerging market peers. While China’s Shanghai Composite Index, Hong Kong’s Hang Seng index, South Korea’s Kospi shed 1% or more, India’s Nifty50 closed the day at 10,951.70, down 0.14%.
But, why was India an outlier?
Easing crude oil prices was a key India-specific factor aiding sentiments on Dalal Street. The fall in crude price is expected to reduce stress on net-oil importer India’s current account deficit.
It will also boost operating margins of Indian corporates who have been reeling under input cost pressure. Brent prices slipped around 3.5% to $55.26/barrel on Thursday. Drawing comfort from this was the rupee, which gained around 1% to 69.69 against the dollar.
The Street also cheered the recent measures from the government to boost liquidity following the IL&FS Ltd debacle. “As liquidity is returning to the system and oil prices are softening, bond yields have fallen sharply. So, public banks would be key beneficiaries of this since they hold bulk of government securities,” said Pramod Gupta, partner, Ajarva Partners.
Besides, this was not the first instance when Indian equities had not been bothered by unexpected events.
Of late, the Indian stock market has been quite resilient to a slew of sudden negative outcomes, including the state assembly election results and the Reserve Bank of India governor’s exit.
In fact, since these events unfolded, the NSE’s India volatility index (VIX), also known as the fear gauge, has declined by 23%. India VIX now stands at 14.33.
The market’s complacency has, however, astonished some analysts.
“The Indian stock market has been resilient to negative news, which is surprising. Earlier, there used to be a high co-relation between the movement in the US markets and Indian stocks, but that doesn’t seem to be the case anymore,” Gupta added.