Stocks rise in relief rally on global cues
NEW DELHI: After last week’s severe sell-off that made it the worst for Indian equities in two years, benchmark indices appeared to be witnessing a relief rally this week.
Helped by positive global cues, the Nifty and the Sensex rose 1.88% and 1.81%, respectively, on Tuesday, the second consecutive day that the domestic indices have ended on a positive note.
Declining commodity prices are helping improve sentiments, while analysts also said the absence of fresh news about inflation and interest rates also helped support the rebound. Analysts are of the view that markets may be factoring in rising interest rates and inflation concerns to a large extent. Nevertheless, they maintain caurates tion, saying any negative news flow can impact sentiments.
“Absence of fresh selling triggers in the domestic and global economy, along with falling commodity prices, relieved the heavily discounted equity market to showcase recovery,” said Vinod Nair, head of research at Geojit Financial Services. The recovery indicates that uncertainties about inflation and monetary policy tightening have been factored in, Nair said, adding that with the highly sensitive nature of the current equity market, even the slightest inconvenience can trigger volatility.
Asian stocks rose as sentiment stabilized and as investors weighed whether last week’s sell-off had gone far enough to price in concerns about rising and slowing growth, said analysts. Nikkei, Taiwan TAIEX, Hang Seng, and Jakarta Composite all ended with gains of 0.97-2.35%. Only the Shanghai Composite index fell 0.26%.
The decline in crude prices remains a positive development for India and markets. Brent at around $116 a barrel is off recent closing highs of $127.18 a barrel seen on the 8 June. The fall in crude oil prices, positive global cues, bottom-fishing because of cheaper valuations and shortcovering aided Tuesday’s rise, said Deepak Jasani, head of retail research at HDFC Securities Ltd. Calm seemed to have returned to markets after a steep sell-off, Jasani said.
However, the sustenance of the rally remains in doubt, with experts saying investors should take advantage of these intermittent rallies to lighten their positions.