The markets continue their bull run, with the benchmark index, Sensex, closing at 53,000 levels for the first time on Wednesday, gaining 0.37 per cent or nearly 194 points. The markets came back into positive territory post noon followed by a rally in metal stocks and banking and financials.
Foreign institutional investors (FIIs) turned net buyers as they bought shares worth nearly Rs 533 crore on Wednesday, according to provisional data provided by the exchanges. Although FIIs were net sellers in April and May 2021, when the second wave of the pandemic was surging in India, in June 2021, foreign portfolio investors turned net buyers in Indian equities, infusing $2.35 billion into the stock market. The contribution of FIIs in boosting stock prices has been significant; as National Securities Depository Ltd (NSDL) data shows, in 2020-2021, FIIs invested in $37 billion or Rs 2.75 trillion worth of Indian direct equities, which is the highest such investment in 20 years.
Even though Fitch Ratings on Wednesday slashed growth prediction for India to 10 per cent from the earlier 12.8 per cent forecast for the fiscal year 2021-22, it said a faster vaccination pace could trigger a quick revival of business and an uptick in consumer confidence.
As major cues or triggers are lacking, it is expected that the markets will see some sort of a direction in the near term as a consequence of the first quarter earnings for the fiscal year 2022. Experts expect earnings to pick up momentum as vaccination pace picks up and lockdowns have been lifted, signalling a revival of economic activity. If the Q1 results are positive, the month of July is likely to see a boost in FII inflow into the stock markets.
Resilient Sensex during the second wave
The Sensex had closed at 52,000-mark for the first time on February 15 this year. It may be recalled that the move from 51,000 to 52,000 had taken a mere five trading sessions in the month of February, amid a spectacular rally in the markets. This rally was on the back of US President Joe Biden’s inauguration. Even though cases started rising between March and May and the second wave peaked in mid to late May, the Sensex didn’t see a collapse as was witnessed in March 2020 when it plunged to 25,000-levels. The markets definitely saw a below the mark performance with the Sensex falling to 47.7k levels on April 20, which was the lowest closing levels in the past three months. However, it traded back at 50k plus levels on May 21, even as India’s Covid-19 cases crossed the 4 lakh cases per day mark.
During the peak of the second wave, investors continued to focus on the long-term fundamentals, looking beyond the immediate impact of the lockdowns and rising cases. The accommodative stance of India’s central bank, the RBI, has also ensured that there is adequate liquidity in the markets, sustaining the positive sentiments. The Monetary Policy Committee (MPC) of the Reserve Bank ensured that the repo rate remained unchanged at 4 per cent in its June meeting. Further, the strong results that key companies posted in the fourth quarter of 2021 also pushed the optimistic sentiments of the market further.
The Sensex closed at 53,000-levels on Wednesday signalling that the markets are on a sustained bull run, though there have been some corrections in the past. The markets took a slight dip during the peak of the second wave but with the lifting of curbs and lockdowns following a drop in cases, the benchmark indices have been consistently trading at 50k plus levels in the recent past. The pace of vaccinations and resumption of business activity, followed by earnings reports for the first quarter will all dictate which way the benchmark index will go in the future.