Markets gain as prices of commodities moderate

The benchmark indices continued their winning run for the third consecutive session as investors assessed whether slowing economic growth and moderating commodity prices will prompt central banks to be less aggressive in hiking interest rates.

Buying in IT stocks – spurred by a global trend – accounted for the bulk of the gains in the benchmark indices.

The Sensex rose as much as 781 points, or 1.5 per cent, during the day, but failed to hold on to the gains because of selling pressure from foreign investors. However, the net outflows from foreign portfolio investors (FPIS) of ~1,278 crore was considerably below this month’s daily average. The Sensex ended the session at 53,161, with a gain of 433 points, or 0.8 per cent. The Nifty ended the session at 15, 832, a gain of 133 points or 0.8 per cent.

The benchmark indices have now rebounded 3.5 per cent from this month’s low hit on June 17.

A dip in crude oil and other commodity prices has cheered investors.

Though crude prices rose on Monday and Brent Crude was trading at $115 per barrel, this is much lower than the $124 per barrel figure it quoted at the beginning of the month.

“Declining commodity prices have lifted the exhausted domestic equity market in recent sessions. Despite this positivity, the underlying fear of recession, tightening monetary policy, and inflation can trigger volatility. A strong revival in the market can only be expected when the economy stabilises from these uncertainties and when FIIS turn net buyers,” said Vinod Nair, head of research, Geojit Financial Services.

Investors are assessing whether inflation, which has hit historic levels in recent times, has reached a peak and will moderate going ahead.