Equities posted their best weekly gain in a month as benchmark indices rose 2.9% during the week. BSE Sensex recovered last week’s 1.9% losses to advance 801.91 points. The Nifty surpassed the psychological 8,500 mark and closed with gains of nearly 3% or 249.3 points.
The Sensex rose to a three-month high on Thursday after the government proposed to raise the composite cap on foreign investments from 49% to 74%. Foreigner portfolio investors (FPIs) turned net buyers during the week as the year to date FPI inflows crossed $7 billion mark on Thursday. During the week, FPIs bought cash equities worth $430 million. Domestic Institutional Investors (DIIs) on the other hand sold equities worth $99 million during the week.
Experts said global cues have been positive in the last 8-10 days as Greece crisis was averted as euro zone struck a deal with Tsipras averting a possible exit of Greece from Euro. US has signed the landmark nuclear deal with Iran, driving Brent crude prices to below $57 a barrel. Brent futures on the Intercontinental Exchange have lost nearly 20% from May. Brent crude now trades around five-and-a-half month lows at $57 per barrel, data showed.
Major Asian markets, including that of China, also recovered last week’s losses following the rout in Chinese markets. Chinese equities partially recovered during the week with Shanghai Composite as well as Hang Seng closing up 2% each. Japan’s Nikkei closed 4.4% higher for the week.
The Street is now finding solace in the US Federal Reserve’s monetary policy stance. Fed chair Janet Yellen’s testimony that raising interest swiftly could threaten the recovery boosted sentiment, analysts said.
“My own preference would be to be able to proceed to tighten in a prudent and gradual manner,” she said in the testimony. Yellen also noted that the Federal Reserve would look for improvement in the labour market and will refrain from raising rates as doing so could threaten the current recovery.
The Street will keenly track the developments of the monsoon session of the Parliament that begins next Thursday.
“While India will not stay immune to any FOMC liftoff induced suppressed inflows for emerging markets, India will be relatively less impacted as the EM differentiation is likely to intensify further as global commodity deflation becomes more entrenched. In addition, the perception of EM currency stability and willingness/ability of respective governments to engineer a domestic turnaround will also be further factors of differentiation,” noted Abhay Laijawala, MD and head of research, Deutsche Equities India.
The week was positive for the mid-cap stocks with the index touching new peaks . The BSE Midcap index closed at 11,220, up 349 points or 3.2% from last week.
HDFC Securities in a morning note to investors observed that boarder markets were in a much healthier state the benchmark indices. “… 41% of all stocks are higher than their March 4 highs. Amongst those listed on the NSE, 44% of the stocks are higher than their March 4 levels,” stated the Mumbai-based financial services firm in its note.
The rally in pharma shares continued during the week, with most stocks closing in the green for fifth straight week. IT shares also traded in green during the week, with the BSE IT closing 470.95 points or 4.36% higher. Falling crude prices in global markets helped the shares of oil marketing and distribution companies pick up as the BSE Oil & Gas index capped the week with gains of 3.1%.