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The benchmark Sensex and Nifty indices gained for a fifth consecutive day on optimism stoked by the US Federal Reserve's dovish stance on monetary-policy tightening. Domestic factors, including better-than-expected monsoon and easing of inflation, further boosted investor sentiment towards Indian stocks, which have come off around 10 per cent from their March levels.
The benchmark Sensex on Thursday gained 283.17 points, or 1.06 per cent, to close at 27,115.83, highest level since June 2. The board-based Nifty gained 83.05 points, or 1.03 per cent to 8,174.6. The Fed outlook also boosted the rupee and the 10-year government bonds.
“The positive outcome from the US Fed meeting has resulted into the buoyancy. A hawkish stance by the Fed would have acted as a dampener. The Fed meeting has provided lot of relief to the market,” said Sudip Bandyopadhyay, MD & CEO, Destimoney Securities.
The Fed maintained its outlook for interest rates increase this year, however, has lowered the rate-hike forecasts for 2016. The US Fed Chair Janet Yellen has said she will wait for more evidence of a lasting turnaround before raising near-zero interest rates.
The Fed statement is expected to ease foreign fund flow concerns to emerging markets like India. So far this month, foreign institutional investors (FIIs) have been pulling out money from markets, including India, Taiwan and Indonesia. The Indian market has seen FIIs selling to the tune of nearly $1 billion this month. Despite the jump in the market, FIIs continued to remain net sellers on Thursday, as they pulled out another Rs 784 crore from Indian stocks, provisional data showed. Domestic investors, in comparison, were net buyers of more than Rs 1,100 crore.
Market players said besides the Fed boost, improving macro situation domestically too has boosted share prices.
“Domestic concerns such as deficient monsoon, long pause in further rate easing by the RBI and earnings improvement have been seen abating,” said Ajay Bodke, CEO & chief portfolio manager – PMS, Prabhudas Lilladher Private. “The progress of the monsoon has so far exceeded expectations. Fears of massive earnings downgrade too have been overblown. Also, the government’s resolve towards capital expenditure is become evident from the April numbers. Other macro factors such as inflation data and trade deficit continue to be benign.”
The gains on Thursday were led by oil and gas stocks, including Reliance Industries and ONGC. Tata Motors, Wipro, HDFC Bank and Sun Pharma were among the other major gainers in the Sensex index.
In the past one month, several foreign brokerages have scaled back their year-end target for the Indian markets. However, many analysts believe that the improvement in the country’s macro economic could act as a tailwind for Indian stocks.
“We believe that the worst of the earnings downgrades may be behind. India will not be immune to global volatility, but it may still outperform its emerging market peers based on an improving domestic macro economy, return of government spending and the end of earnings downgrades,” said Abhay P Laijawala, managing director and head of research at Deutsche Equities India.
