 "BSE, stock market, sensex")
Robust foreign portfolio investor (FPI) flows, unprecedented gains for IT bigwigs, and optimism around the peaking of interest rates propelled domestic equities to new highs on Friday.
The BSE benchmark Sensex closed at 66,061, following a gain of 502 points, or 0.8 per cent. The Nifty50 finished at 19,565, gaining 151 points, or 0.8 per cent. The indices hit new highs both on intraday and closing bases.
From this year’s low in March, the Sensex and the Nifty are now up around 15 per cent each.
Sharp gains in shares of software exports underpinned the latest gains. The top five Sensex and Nifty50 winners were IT companies, which accounted for all the gains posted by the benchmark indices. Up 4.7 per cent, the Nifty IT posted its biggest single-day gain since September 2022.
Tata Consultancy Services (TCS) gained 5.1 per cent; it was followed by Infosys, which rose 4.4 per cent on optimism that the long-term growth trajectory for the sector is intact. Moreover, analysts said newer areas like artificial intelligence (AI) improve outlook for the medium-to-long term and provide additional revenue sources for IT services firms.
Also Read
FPIs remained net buyers of Indian equities. On Friday, they bought shares worth Rs 2,636 crore, even as domestic institutions sold shares worth nearly Rs 800 crore. This year so far, FPIs have bought shares worth Rs 1.2 trillion.
Most global markets posted strong gains this week amid growing optimism that central banks are finally succeeding in taming inflation. The US inflation data, published on Wednesday, showed that the rise in prices there has eased to a two-year low.
“A few weeks ago, we had sticky inflation and the Fed was talking about a few more hikes. But then the inflation numbers were cooler than expected, and wage growth was lower. We have the dollar index below 100. This has led to optimism that Fed hikes need not go beyond July, unlike the end of the year, which was the earlier base case. And risk assets from the emerging markets have come more into play because investors are looking for growth, and growth is coming from Asia," said Andrew Holland, CEO of Avendus Capital Alternate Strategies.
Some experts said if US inflation is approaching its targeted levels, there may not be a case for rate hikes in India either.
However, central bankers in the US remain cautious and maintain that more than one rate increase may still be necessary. Federal Bank of San Francisco Governor Mary Daly on Thursday said it's too soon for policymakers to claim they have done enough for inflation to return to their targets. Federal Reserve Governor Christopher Walker said the American central bank will have to raise rates twice this year to bring inflation to its target.
The rally since March lows has pushed Sensex and Nifty valuations above long-term averages. Investors are hopeful that strong earnings momentum will continue to support the markets, even as valuations remain elevated. FPI flows will remain key.
"The market is waiting for an excuse to correct. Even a day or two of tepid FPI flows can lead to a correction,” cautioned U R Bhat, co-founder of Alphaniti Fintech.
