Markets recover losses even as Fed tapering signals haunt investors
Premium- The BSE Sensex was up 230.01 points or 0.44% at 52,574.46. The Nifty edged 63.15 points or 0.40% higher at 15,746.50.
Indian markets recovered losses during late trade on Monday after remaining under pressure following global sell-off. Weak currency, rising crude prices and fears related to sustainability of FIIs flow due to taper talk by the US Federal Reserve aggravated investors’ concerns in the last couple of days.
The BSE Sensex was up 230.01 points or 0.44% at 52,574.46. The Nifty edged 63.15 points or 0.40% higher at 15,746.50.
MORE FROM THIS SECTIONSee All
Shares in Asia-Pacific region were mostly lower while China kept its benchmark lending rate unchanged. Japan’s Nikkei fell over 3%, while Hong Kong’s Hang Seng index dropped 1.28% and South Korea’s Kospi declined 0.83%.
Investors are continuing to sell equities as Fed officials' statements indicated that the shift toward faster policy tightening was a natural response to economic growth and particularly inflation. Analysts feel a gradual tapering seems the most likely scenario for most economies including India.
“Domestic equities witnessed brisk recovery after seeing steep gap-down opening today and shrugged-off weak global cues once again. Notably, strong rebound in PSU Banks was a prime factor for market’s recovery," Binod Modi, Head Strategy, Reliance Securities said.
He added that while India's daily caseload falling offers comfort, indication of a third wave in next 6-8 months in the country can raise fresh concerns. However, the impact of third wave can be the least compared to first two waves. “Minutes of RBI policy meeting published on Friday were favourable, which indicate continued accommodative stance from RBI as to spur economic activities in the country," Modi added.
According to Nomura, relaxed lockdown measures and moderating cases have expectedly triggered a snapback in mobility. “A third pandemic wave over the next few months is a key risk that bears monitoring," it said in a note. The Nomura India Business Resumption Index (NIBRI) which tracks high frequency data picked up to 81.3 for the week ending 20 June, up 6.4 percentage points from the previous week.
Credit Suisse Wealth Management, India believes that the Indian market may remain susceptible to some profit- booking especially from the FPIs. However, the outflows will be limited as India’s underlying fundamentals have strengthened and expectation of faster vaccination and opening up of the economy will keep buying interest high on corrections.
“India’s valuation premium has reached 12% and 55% compared to the five year historical average of 8% and 45% for the MSCI World and MSCI Emerging Markets, respectively. We expect India’s valuation premium to remain at elevated levels as it offers one of the fastest growth in the region. Additionally, robust FPI inflows and improving corporate fundamentals, like balance sheet health and return on equity (ROEs), also support the higher valuation premium," Jitendra Gohil, CFA, Head of India Equity Research Premal Kamdar, Equity Research Analyst, said in a note on 18 June.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!