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Indian markets have witnessed a strong rebound in the past eight trading sessions with Sensex once again crossing more than 58,000-mark and Nifty 50 inching closer to 17,350-level. Moderation at a certain level in commodity prices and softness in crude oil prices lifted investors' appetite for equities. FPIs have also started to become buyers in Indian equities after being net sellers for a long time. Markets are well-positioned to move in the upward direction.
On Friday, Sensex settled at 57,863.93 up by 1047.28 points or 1.84%. The 30-scrip benchmark has gained over 58,095 on the day. Nifty 50 ended at 17,287.05 higher by 311.70 points or 1.84%, however, after touching a high of 17,344.60.
Talking about Friday's performance, S Ranganathan, Head of Research at LKP securities said, "Positive Global Cues post the Fed rate hike, softening oil prices and progress in Russia- Ukraine talks boosted the confidence of the Bulls as benchmark indices were up over 2% in Afternoon Trade. With the Volatility Index cooling off considerably today, the broader markets too displayed optimism as several Tata Group companies posted 52-week highs reminding one of the famous Philip Fisher's words - It is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens."
At home, markets were in a gaining spree this week's trading session as economic data like inflation and US Federal Reserve's monetary policy outcome along with the Bank of England's policy stance took focus.
From March 07 till 17th, Sensex has jumped by more than 5,250 and Nifty 50 has soared by over 1,480 points. During these days, investors' wealth soared by more than Rs19 lakh crore.
BSE Sensex market cap stood at Rs2,60,37,730.78 crore by end of March 17, rising by Rs19,26,899.74 crore compared to a market valuation of Rs2,41,10,831.04 crore on March 07, 2022. Except for some correction on March 16, the market cap of BSE Sensex rose in the remaining days.
The key factor to note this week was the US Federal Reserve's rate hike by 25 basis points to battle against the four decades high inflation. The Fed committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting. Also, the Fed expects six more rate hikes soon.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "The market drew confidence from the Fed chief Powel's statement that "the American economy is very strong and well-positioned to handle tighter monetary policy."
Shivam Bajaj, Founder & CEO at Avener Capital said, "The rate hike by Fed was on expected lines due to high inflation risk coupled with geopolitical tensions. The US treasury yields had shown an immediate spike after the FOMC announcement but stabilized thereafter. The current rate hike along with anticipated monetary tightening indicates the Fed's stance of controlling the high inflation prevalent in the US."
On a similar pattern like US Fed, the Bank of England hikes bank rate by 25 basis points to 0.75%. Given the current tightness of the labor market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist, the Committee judges that an increase in Bank Rate of 0.25 percentage points is warranted at this meeting. The committee expects inflation to shoot up to 8% in 2022 Q2, and perhaps even higher later this year. According to the committee, the effects of Russia’s invasion of Ukraine would likely accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes.
With both major central banks opting for a rate hike in the recent scenario, in India, the focus will now shift at RBI which will be presenting the country's first bi-monthly monetary policy in early April.
"Asian markets have reacted positively on account of the Russia-Ukraine situation entering the resolution phase which was further supported by stabilization of crude prices. Taking this into account, the RBI may reassess its accommodative stance in the next month’s policy meeting," Bajaj said.
Geojit's Chief Investment Strategist said, "FPIs turning buyers after a long time and softness in crude will support the market. There is upward potential in financials, particularly in high-quality private banks in which FPIs were sustained sellers"
Going forward, on Nifty, Rupak De, Senior Technical Analyst at LKP Securities said, "The benchmark index has moved into the positive zone on the back of a breakaway gap candle on the daily chart, indicating a change of trend. Going ahead, the trend is likely to remain positive for the short to medium term as long as 17000 is maintained on a closing basis. On the higher end, immediate resistance is visible at 17330. A decisive move above 17330 may induce a stronger rally in the market"
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