Indices rebound as traders buy the dips
Investors bought the dips for the second day in a row, helping markets shrug off the negative sentiment triggered by the US Federal Reserve’s hawkish stance.
Stocks had come under selling pressure after comments by a Fed official, who said he expects rate hikes as early as next year.
Mirroring losses in the global markets, domestic equities, too, fell sharply both on Friday as well as Monday. However, they recouped all the losses on both days.
Experts said strong buying is emerging from retail investors and domestic institutions whenever the market is seeing a selloff.
“Honestly, I am also surprised. I cannot think of any other reason but the optimism of new investors,” said G Chokkalingam, founder, Equinomics.
The Sensex recovered 834 points from the day’s low on Monday, and on Friday, after dropping more than 700 points, the index managed to end the day with a 21-point gain.
On Monday, the benchmark Sensex ended the session at 52,574, gaining 230 points or 0.44 per cent. The Nifty, on the other hand, ended the session at 15,746, a gain of 63 points or 0.4 per cent.
Many analysts were expecting the markets to fall after the US markets fell sharply on Friday. Markets were jittery after Fed official Jim Bullard said that the first interest rate hike by the US central bank could come as early as the end of next year.
In addition, investors were also distressed by the Fed’s indication of a rate hike.
Analysts said the global economic recovery had created a healthy risk appetite for all risk asset classes. And, India crawling back from the onslaught of the second wave of Covid-19 has made the condition appropriate for investor interest.
“This year looks to be the strongest in GDP growth globally after a while. Even in India, in the second unlock, it is clear that demand is reviving. Every central bank is saying that they will continue the easy money policy. Even though there are fears of a third wave, the vaccination efforts globally have made good progress. And that is giving comfort to people that even if a third wave comes, its effect will be muted,” said Saurabh Mukherjea, founder, Marcellus Investment Managers.
Analysts said investors would be keenly awaiting more comments by Fed policymakers, including its chairman Jerome Powell.
Concerns about Fed’s rate hike led to benchmark Sensex’s four-week winning streak coming to an end last week. In the preceding four weeks, the index had risen about 8 per cent. The gains were underpinned by an extended period of lowinterest rates in the US, diverting inflows into riskier emerging markets like India. In addition, the declining Covid cases in India and the possibility of easing restrictions leading to economic revival also boosted investor sentiment.
On Monday, 398 stocks hit their 52-week high, and 573 were locked on the upper circuit. The market breadth was positive, with 2,049 stocks advancing and 1,258 declining on the BSE.
Adani group shares rose amid reports that the promoters purchased shares from the open market.
Two-thirds of Sensex stocks rose. NTPC was the best performing Sensex stock and went up 3.8 per cent. Titan rose 1.8 per cent, State Bank 1.6 per cent and Hindustan Unilever 1.4 per cent. Barring three, all sectoral indices gained. Power and realty stocks went up the most, and their indices increased 2.5 and 2.3 per cent, respectively.