)
Indian shares bounced back on Thursday as US Federal Reserve chairman Ben Bernanke eased concerns about an early withdrawal of the bond-buying programme there.
Indian markets followed their Asian peers as markets across emerging economies heaved a collective sigh of relief and rallied on an average by two per cent. The BSE Sensex rose to a 45-day high; the National Stock Exchange’s Nifty closed above the psychological 5,900 level.
The Sensex gained as much as 2.2 per cent on an intra-day basis but ended the day up 1.9 per cent, at 19,676. The Nifty closed at 5,935, up two per cent.
The reversal of earlier pessimism helped bring buoyancy to the market, said analysts. “In the short term, the market will remain volatile. The key drivers will be the statements from the Fed and other US data. The market had built a hypothesis that stimulus tapering might start soon. However, after the Fed's latest comments, some optimism has come back,” said Nitin Jain, head of capital markets at Edelweiss Financial Services.
However, some fund managers and analysts are less than convinced about the rally seen on Thursday.
“Bernanke has not said anything different from what he has already been saying for the past few months about QE3 (the bond-buying programme). The rally on the back of this news might not be sustainable beyond a point,” said Ramanathan K, chief investment officer of ING Investment Management India.
The sceptics say the initial euphoria could soon give way to renewed apprehension about the flows from foreign investors and worries about the eventual tapering of QE3.
For now, the market could turn to earnings numbers and domestic macro economic data for guidance, said participants.
The results season is set to begin on Friday, with Infosys announcing its first quarter numbers. The season is not expected to spring many surprises and has largely been already factored in by the markets, said fund managers.
However, individual companies might throw up the odd bombshell, suggest some. “Stock reactions to earnings have so far been reasonably sharp in either direction. There has been no broader market at play and, therefore, individual companies will have to be watched,” said Sudhakar Shanbhag, chief investment officer of Kotak Mahindra Old Mutual Life Insurance.
Inflation and industrial production data will also be watched for by market participants. Foreign investors were net buyers for the day at Rs 638 crore. Analysts said foreign flows were likely to continue into the Indian market, easing pressure on the rupee. The currency, they said, could stabilise around the current levels of Rs 58-59 against the dollar. On Friday, the rupee closed at 59.68 to the dollar.
Domestic institutions, however, continued their selling spree and were net sellers at Rs 234 crore.
Banking stocks rallied, with the BSE Bankex gaining about 2.5 per cent. HDFC Bank, which rose by 3.3 per cent, led the rally in the sector, followed by IndusInd Bank, up 2.9 per cent, and Axis Bank, up 2.6 per cent.
Metal stocks also gained, with Sterlite Industries and Hindalco the highest gainers among Sensex stocks. Both were up 4.7 per cent.
