ROUNDUP: Cheer on Dalal Street as Indian stocks extend gains into fifth week
Aug 21, 2022
New Delhi [India], August 21 : Indian stocks extended their bull run for the fifth straight week supported by fresh inflows of foreign investments as well as some moderation in inflation -- both in the US and India.
Also, the latest softening of international crude oil prices infused buying sentiments among investors.
The total market capitalisation of BSE-listed companies this week touched an all-time high. Besides, the benchmark index Sensex touched the psychologically crucial 60,000 mark on Wednesday after more than four months to later fall on Friday due to mild profit booking.
During the past five weeks, benchmark indices - Sensex and Nifty - rose nearly 10 per cent on a cumulative basis, thereby recovering largely the entire losses they witnessed so far in 2022.
The latest rally in stocks made Indian investors richer by around Rs 25 trillion. The all-India market capitalization rose from Rs 25,319,892 crore on July 11 to Rs 27,775,698 crore till last updated on Friday, Bombay Stock Exchange data showed.
For the record, till early July, foreign portfolio investors (FPIs) were consistently selling equities in the Indian markets for the past nine-to-ten months due to various reasons, including tightening of monetary policy in advanced economies, and rising demand for the dollar and high returns from US bonds. They have pulled out Rs 167,888 crore worth of equities so far in 2022, NSDL data showed.
In July, they were, however, the net buyer with a total purchase of equities worth Rs 4,989 crore. So far in August, they bought equities worth another Rs 44,481 crore, data showed.
Commenting on the weekly market trend, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said, "Equity market started the week on a positive note, but correction on Friday erased most of the weekly gains."
"Recent market rally possibly reflects increasing expectation about the peaking of inflation, commodity price correction and decent earnings visibility. India's July 2022 CPI inflation saw moderation. Further, some decline is being witnessed in oil prices. Q1FY23 results were broadly on expected lines. FPIs flows have started to turn favourable," Chouhan added.
India's retail inflation fell to 6.71 per cent in July from 7.01 per cent in June, the lowest level in five months, helped by an easing in food and oil prices, as per the National Statistical Office (NSO) data.
Although the retail inflation has declined significantly in July when compared with the previous month, it still remained higher than the Reserve Bank of India's (RBI) upper tolerance limit of 6 per cent.
India's wholesale inflation declined substantially during the month of July to 13.93 per cent from 15.18 per cent, but continues to remain in double digits, official data released on Tuesday showed.
Notably, the Wholesale Price Index (WPI) based inflation has been in the double-digit for 16 months in a row now.
The Dalal Street will now focus on the macro trends as the results season nears its end.
"There are also no significant macroeconomic events taking place in the coming week, thus the focus of the market will be on the trends on foreign buying and Brent crude (prices)," said Apurva Sheth, Head of Market Perspectives, Samco Securities.
The latest rally has been greatly aided by the ongoing foreign buying.
"The market will be closely monitoring this trend because any reversal could cause a temporary blip," Seth added.
According to Joseph Thomas, Head of Research, Emkay Wealth Management, further rate hikes to bring down inflation to the target levels may put some pressure on the markets in the coming week.
