A roller-coaster ride: FPIs propel Nifty to reclaim 18K; Sensex tops 60K

India’s benchmark indices rose on Monday amid strong buying from foreign portfolio investors (FPI), and hopes of the US Federal Reserve going slow on rate increases after an impending hike this week.

The Sensex ended the session at 60,746, gaining 786 points, or 1.3 per cent, the highest close since January 18, while the Nifty gained 225 points, or 1.27 per cent, to close at 18,012. The Sensex ended above 60,000 and the Nifty above 18,000 for the first time since September 14.

In October, the Sensex gained 5.7 per cent or 3,319 points whereas the Nifty gained 5.3 per cent, or 918 points—the best monthly gains for both the indices since July.

Hopes of a softening rate cycle made FPIs turn net buyers in October after selling shares worth Rs 13,405 crore in September. Foreign investors bought shares worth Rs 4,178 crore on Monday, according to provisional figures from the exchanges. FPIs bought shares worth Rs 5,692 crore in October. Investors expect the Fed to soften its stance from hereon, though the US central bank may raise rates by 75 basis points (bps) for fourth successive time this week. 

 The strength of the US economy, which is indicating a lower probability of an immediate recession, and hopes that inflation is plateauing, is raising bets in favour of a dovish stance by the Fed.

The US Gross Domestic Product (GDP), released last week, showed that the US economy rebounded 2.6 per cent in the July-September period following two quarters of contraction.  

The decline in crude oil prices further boosted investor sentiment. Brent crude ended the session at $93.4, a decline of 1.7 per cent as weak economic data from China fuelled concerns about energy demand.

Despite optimism, investors continue to be concerned about rate hikes as inflation and economic distress continue to be a global challenge.

The Eurozone inflation surged to an all-time high with consumer prices rising 10.7 per cent in October.

"The data is mixed, but markets seem to focus on the hope that the Fed will stop hiking after the rates reach 5 per cent," said Andrew Holland, chief executive officer (CEO), Avendus Capital Alternate Strategies.

Apart from the Fed, the Reserve Bank of Australia and the Bank of England will announce their monetary policy decisions this week. Investors will also be tracking US nonfarm payrolls, and unemployment data. The RBI has also scheduled an emergency meeting.

“The buoyancy in the global markets, especially the US, combined with favourable domestic cues, is helping the markets to maintain the recovery. We expect the Nifty to regain momentum above the 18,100 level. In line with the trend, participants should look for buying opportunities on every dip and avoid contrarian trades,” said Ajit Mishra, vice-president, research, Religare Broking.