Benchmark indices extend winning streak as commodity prices moderate

The benchmark indices continued their winning run for the third consecutive session as investors assessed whether slowing economic growth and moderating commodity prices will prompt central banks to be less aggressive in hiking interest rates.
 

Buying in IT stocks – spurred by a global trend – accounted for the bulk of the gains in the benchmark indices.
 

The Sensex rose as much as 781 points, or 1.5 per cent, during the day, but failed to hold on to the gains because of selling pressure from foreign investors. However, the net outflows from foreign portfolio investors (FPIs) of Rs 1,278 crore was considerably below this month’s daily average.
 

The Sensex ended the session at 53,161, with a gain of 433 points, or 0.8 per cent. The Nifty ended the session at 15, 832, a gain of 133 points or 0.8 per cent. The benchmark indices have now rebounded 3.5 per cent from this month’s low hit on June 17.
 

A dip in crude oil and other commodity prices has cheered investors. Though crude prices rose on Monday and Brent Crude was trading at $115 per barrel, this is much lower than the $124 per barrel figure it quoted at the beginning of the month.
 

“Declining commodity prices have lifted the exhausted domestic equity market in recent sessions. Despite this positivity, the underlying fear of recession, tightening monetary policy, and inflation can trigger volatility. A strong revival in the market can only be expected when the economy stabilises from these uncertainties and when FIIs turn net buyers,” said Vinod Nair, head of research, Geojit Financial Services.
 

Investors are assessing whether inflation, which has hit historic levels in recent times, has reached a peak and will moderate going ahead.

The slowing US economy has led some investors to hope that the US Federal Reserve will rethink its plans for aggressive rate hikes. Analysts said companies were already suffering from tighter financial conditions and weakening consumer demand, and this could make central banks scale back their plans for rate increases.
 

A rebound in metal stocks further cheered investors. Improvement in the Chinese economy and easing Covid-19 restrictions are helping raw material prices. Analysts said economic activity in Shanghai had improved since the lockdowns were eased.
 

Traders are keenly tracking the outcome of a Group of Seven (G7) summit, with the leaders planning to provide indefinite support for Ukraine and considering a price cap on Russian oil. However, energy sector experts have warned that Moscow may retaliate by cutting off gas supplies to Europe.
 

“We feel global cues will continue to dictate the trend. Besides, domestic factors like the upcoming GST (goods and services tax) Council meeting will also be in focus. We reiterate our positive yet cautious view on the markets, citing the hurdle at 15,900 levels.

A decisive breakout could further fuel the recovery to the 16,200 zone in the Nifty. A correction would resume. We have been seeing select sectors/themes doing well, so the focus should be more on identifying the stocks from such themes while keeping a check on leveraged positions,” said Ajit Mishra, vice-president of research, Religare Broking.
 

The market breadth was strong, with 2,360 stocks advancing and 1,067 declining on the BSE. Barring three, all Sensex constituents ended the session with gains. Stocks in the capital goods sector gained the most, and the sectoral index rose 2.26 per cent on the BSE.