Indian equities gained 2.5% on Tuesday, recouping all the losses it made a day earlier, on the back of strong buying from overseas investors.
The BSE Sensex gained 1,564 points or 2.7% to settle at 59,537 while the Nifty was up 446 points or 2.6% at 17,759.
Market watchers attributed the sharp rally to concentrated buying from FPIs, especially in banking and financial services firms. FPIs bought shares worth over Rs 4,000 crore net on Tuesday, provisional figures show, taking the month to date buying to Rs 51,000 crore or $6.4 billion. Investors wealth soared by Rs 5.68 trillion by the smart recovery in the equity market.
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“The rebound in local benchmark indices came on the back of recovery in Asian and European indices. The focus seemed to have shifted from the hawkish Fed stance to expectations of strong Q1 GDP numbers. Despite volatility and uncertain global macro environment, the rally shows that India would remain a good long-term bet.
“We are of the view that the short-term market structure has changed from negative to positive due to a strong pullback from lower levels,” said Shrikant Chouhan, head of equity research – retail at Kotak Securities.
The Indian market is factoring a lot of good news that includes economic recovery, declining inflation and reasonable earnings visibility.
“Valuations are quite stiff for the broad market and for ‘growth’ consumption and investment stocks. Even tier-1 financials stocks appear fairly valued (a few are super-expensive) after the strong rally in the past two months although most tier-2 and tier-3 banks and NBFCs are still inexpensively valued,” said a recent note by Kotak Institutional Equities.
Foreign brokerage Bofa Securities expects the Nifty to trade within a range of 17,000-19,500, with 18,500 as its base-case target for CY22.
The brokerage sees six structural themes likely to play out within India over time. This includes rapid infra ramp-up, decarbonization, curtailed imports and exports step-up, opening up of government monopolies, improving tax compliance and digitization/financial inclusion.
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“These trends combined with continued reforms momentum have the potential to kickstart multi-year upcycles across capex, real estate, credit growth and start-ups and could create room for lower India’s twin deficits, long-term. We hence remain constructive on markets long-term,” the brokerage said in a note.
Global stocks rose on Tuesday as investors sought bargains following two days of declines. Chinese authorities pledged to stimulate the world’s second-largest economy, initiating measures to boost demand and stabilize employment.
“Negatives are getting discounted in a day or two,” said Deepak Jasani, head – retail research, HDFC Securities.
Jasani believes that Nifty has nullified the bearish signals from the downgap created on the previous day. The index will now face resistance at 17,965-17,992 band while 17,522-17,623 band could offer support.
