PremiumThe decline in commodity prices continues to provide some respite and raise hopes of a less hawkish stance of central banks to control inflation. Some decline in crude prices also is positive for India, improving sentiments.
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The rebound in the markets continued for the third day in a row. Nifty and Sensex gave up some of the gains by end of the session on Monday, but were still up 0.85% and 0.82% respectively. The decline in commodity prices continues to provide some respite and raise hopes of a less hawkish stance of central banks to control inflation. Some decline in crude prices also is positive for India, improving sentiments.
“Falling inflation expectations and easing of covid-19 restrictions in China lifted global commodities helping assuage sentiments in global markets," said Deepak Jasani, head of retail research, HDFC Securities Ltd. The rally in the markets was led by IT stocks, which had been relentlessly sold recently. Metals and capital goods also rebounded a lot.
The buoyancy across global markets boosted sentiment as bulls kept the momentum going for the third straight session, said experts. The Nikkei, Taiwan Taiex, Hang Seng, and Shanghai Composite all ended with gains of 0.88%-2.35%. Only the Jakarta Composite index closed down 0.38%.
Market experts, however, remain cautious till a complete revival in the economy is evident. The progress of the monsoon will also be crucial for the economy. “Declining commodity prices have been lifting the exhausted domestic equity market during the recent sessions," said Vinod Nair, head of research at Geojit Financial Services. A strong revival in the market can only be expected when the economy stabilises from these uncertainties and foreign institutional investors turn net buyers, Nair said.
“The change in mood has come as a major relief. However, the optimism may remain for a few more sessions before the market turns volatile amid concerns about slowing a global economy because of rate hikes and continuing foreign fund outflows." said Shrikant Chouhan, head of equity research (retail), Kotak Securities Ltd. Foreign outflow is a key concern for both Nair and Chouhan. Foreign portfolio investors (FPI) have been net sellers of equities worth more than ₹2.15 trillion in 2022, till 24 June and there is no sign of the trend reversing soon, according to experts.
The FPI selling is putting pressure on the rupee though some respite comes from the cooling of oil prices.
The Indian rupee has tiptoed to a record low of 78.43 amid persistent foreign funds outflows, weaker macro data, and slowdown fears gripping the markets, said Sugandha Sachdeva, vice president, commodity and currency research, Religare Broking Ltd.