Having fallen to an eight-month low of 26,370 in the last week, following outflows by foreign institutional investors and concerns over inflation, the benchmark Sensex at the Bombay Stock Exchange rallied strongly by 890 points or 3.4 per cent this week on both domestic and global factors.
While above normal rains (12 per cent above normal precipitation) this week calmed investor’s nerves, the Federal Reserve’s decision to defer the interest rate hike decision in the US further enthused investor’s confidence. Some feel that lower crude prices followed by Saudi Arabia’s comments on continued higher production levels, also boosted Investor sentiments.
All these had a combined impact and Sensex rose for the six straight trading sessions and closed at 27,316 on Friday whereas the broader Nifty at the National Stock Exchange closed at 8,225.
The gains were however, not limited to the premier indices and even the mid cap and small cap indices witnessed strong gains. The mid cap index at BSE rose 3.6 per cent and the small cap index too jumped 3.5 per cent during the week.
The gains in the market continued despite continued outflow of FII fund. The balance was provided by domestic institutional investors as they received investments from investors. During the week while the FIIs sold equities worth a net of Rs 2,662 crore, the DIIs invested a net of Rs 4,556 crore thereby more than making up for the FII outflow.
“Alleviation of fears that were hurting sentiments until last week has been the primary reason for the current pullback. The above average performance of the monsoon so far, coupled with the April IIP growth coming in at 4.1 per centagainst the broad expected range of 1-1.5 per cent and a restrained CPI inflation at 5 per cent, were amongst the key domestic factors aiding sentiments.
Further, only a modest increase in MSP is also good news for the food inflation to be kept under check. From the global front, a dovish Fed commentary supported equities as an asset class, which also benefited the Indian stock market,” said Hitesh Aggrawal, head of research at Reliance Securities.