Aided by Tata Consultancy Services’ (TCS) September quarter earnings announcement, India’s equity market staged a strong recovery on Friday, after the massive plunge of Thursday, with the benchmark indices - NSE Nifty50 and BSE Sensex – gaining more than 1% each. Despite the recovery, local equities are likely to remain cautious as Brent crude remains above $100/bbl and foreign institutional investors (FIIs) continue to sell shares.
The Sensex closed 1.30% higher at 22,520.45 on Friday, while the Sensex gained 1.23% to close at 72,472. Much of the gain came from strong buying interest in the IT pack after behemoth TCS’s net profit grew 14.9% to Rs 13,884 crore in Q2FY27 while revenue grew 11% to Rs 73,188 crore, exceeding street estimates.
The broader market also witnessed healthy buying interest, with the Nifty Midcap 100 rising 1.56% and the Nifty Smallcap 100 gaining 0.54%.
“Indian equities are likely to remain cautious amid elevated global risks. The rupee has slipped to Rs 96.9/US$, Brent crude remains above US$100/bbl and sustained FII selling continues to weigh on sentiment. Brent crude held around US$103/bbl even after US President Donald Trump indicated that military action against Iran would not resume before the November midterm elections,” said Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services.
Foreign institutional investors (FIIs) net sales stood at a record Rs 12,943.58 on Thursday, one of the highest single-day selling figures in the equity market ever. The US 10-year Treasury yield remained elevated at around 5.3%. Higher US bond yields trigger FII selling in India by making risk-free dollar assets more attractive, which drains liquidity from emerging markets.
Vinod Nair, Head of Research at Geojit Investments Limited, said that persistent FII outflows and elevated global bond yields continue to temper the recovery outlook. He added that investors now await domestic CPI data on Monday for further cues on the interest-rate trajectory after the RBI's shift to calibrated tightening.
A shift in the RBI’s stance from ‘neutral’ to ‘calibrated tightening’, which signals room for further rate hikes as inflationary pressures build amid the West Asia crisis, spooked sentiments with benchmarks closing with sharp cuts on Wednesday and Thursday. The central bank has raised the repo rate by 25bp to 5.5% from 5.25%, its first hike since February 2023, on Wednesday.
IT index gained the most at 3% with TCS gaining 5% and Infosys and HCL Technology surging between 3 and 4%. IT stocks gained following TCS’s quarterly results, although the US suspension of eight technology companies, including Tata, Infosys and HCL, from the PERM green-card sponsorship programme remains a sector-specific monitorable, stated Khemka.
Rupee traded positively, gaining around 20 paise to 96.73. Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said that the local currency was supported by improving capital market flows and optimism over potential US-Iran discussions following US President Donald Trump’s comments on a possible diplomatic approach.