The BSE benchmark indices Sensex and Nifty gained 0.80 and 0.85 per cent respectively at close on Monday, after trading resumed following the Diwali weekend. While the Sensex gained 478 points to close at 60,545.6, the Nifty gained over 151 points closed at 18,068.55 on November 8.
Speaking about the sectoral indices, many of them ended in the green, with oil and gas, realty, IT, consumer durables, metals and financials excluding private bank stocks gaining. While the Nifty IT rose 1.27 per cent, Nifty Metal rose 1.45 per cent. Nifty PSU Bank was up 1.17 per cent. Meanwhile, the volatility index (VIX) increased 3.76 per cent to touch 16.34.
Although the market opening was toned down, the indices regained from the muted session on the back of several macro factors. Recent news reports suggest that the PHD Chamber of Commerce and Industry (PHDCCI), the industry body’s Economy GPS Index for the month of October 2021 has risen to 131 from the 113.1 level in the earlier month. Between April and October this year, the Index stood at an average of 114.8, an increase when compared to the 78.7 in the fiscal year 2020-21. The Economy GPS Index is based on the values of three indicators, including GST collection, Sensex, and passenger vehicle sales to indicate the status of the country’s economic recovery.
US Fed moves
A key global factor that has played a role and is likely to be watched keenly is the US Federal Reserve’s interest rate hike. According to US Federal Reserve’s Vice Chair comments cited in reports, the factors that would aid the central bank to raise interest rates is likely to be fulfilled towards the end of 2022. This is likely to play a role in the Indian equity markets as well, as liquidity may see an impact. However, this is not an immediate concern, experts note.
The Fed has also announced the monthly bond purchase taper program from this month but the markets, including the S&P 500 have remained calm, and the same is likely to be true of the Indian markets. The US Fed taper program is not expected to lower liquidity on an immediate basis, according to reports.
The Indian equity markets have been buoyed by the domestic institutional investors (DIIs) and retail investor interest in the recent past. On Monday, November 8, according to provisional information from the depository, DIIs bought shares worth a little over Rs 1,911 crore to offset FIIs selling shares worth over Rs 860 crore.
India Inc earnings results, fuel tax cuts
Further, earnings results from the September quarter shows that out of the 38 companies in the Nifty 50 world, 21 have exceeded analyst expectations. In spite of input costs being on the higher side, India Inc has shown an increase in sales. Reports show that sales were higher by 35 per cent year-on-year, across a sample size of 202 companies, barring banking and financials.
Further, the fuel tax cuts of Rs 10 per litre on diesel and Rs 5 per litre on petrol followed by lowering of value-added tax in some states is expected to ease input costs and inflation, according to analysts. Input costs refer to all the costs that are incurred n the manufacturing of a product or bringing out a service.
Further, the services Purchasing Managers’ Index (PMI) for October rose to an 11-ear high at 58.4, while manufacturing PMI rose to 55.9 in October, a high of eight months, indicating an economic recovery.
The other factors that will indicate the direction of the markets include the US inflation numbers that are expected to come in by Wednesday. The US Dollar Index is expected to react to the inflation data. The US Dollar Index is a measure of the value of the US dollar relative to six foreign currencies. Any change in the index is likely to impact the flow of funds into the equity markets and companies that are in the export and import businesses. When the dollar index falls, foreign institutional investors gain in terms of the dollar.
The benchmark indices, BSE Sensex and the NSE Nifty gained over 0.80 per cent and 0.85 per cent, respectively as macro indicators show that economic recovery is on the cards, amidst some amount of volatility.
What does input costs mean?
Input costs are the term used to describe all the costs that are incurred in the creation of a service or the manufacturing of a product.
What is the US Dollar Index?
The US Dollar Index is a measure of the value of the US dollar relative to six foreign currencies, including the Euro, Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.
When does the US bond purchase taper program begin?
The US Federal Reserve will begin to taper its $120 billion monthly bond purchase program from November 2021 and end it by mid-2022.