MUMBAI: Indian stocks continued their recovery for a third straight session amid the weekly options expiry and the NDA’s impressive win in four out of five assembly elections. However, analysts caution that with state elections done and dusted, the focus would shift back to the Russia-Ukraine talks and crude oil prices. The Nifty and Sensex gained 1% and a half each, closing at 16594.9 and 55464.39 respectively on Thursday. Heavyweights like HUL, Tata Steel, Grasim, SBI and JSW Steel led the rally, rising between 3% and 5%, while Coal India and ONGC were among the top losers.
However, FIIs continued to be sellers, offloading shares worth a provisional Rs 1,981 crore, even as DIIs purchased a provisional Rs 946 crore of shares. Citing continued FII selling, analysts said the fate of the recovery rests on a speedy resolution of the Ukraine conflict and that a prolonged war could raise the uncertainty, putting the market back into a bear grip.
“We believe investors still need to be vigilant because the uncertainty of geopolitical standoff still looms large,” said Aishvarya Dadheech, Fund Manager, Ambit Asset Management. “Commodity prices are least likely to see a secular downturn even after war subsides because sanctions will continue to disrupt the global supply chain. Unless sanctions are withdrawn, the global markets can remain volatile in the coming months and India will not remain insulated.”
After rising over 7% on Wednesday on hopes of breakthrough in the Ukrianian crisis, European indices again began to correct. The German DAX was down 2.8% while the French CAC traded down 2.6% at the time of writing. Dow Jones futures were lower by 1%, indicating a weak opening. Investment bank Morgan Stanley warned that oil prices could play the spoil-spurt to corporate earnings revival.
While revising its Sensex target lower to 62000 from 70000 for the year end, MS cut its corporate earnings growth forecast by 8% for FY23 amid the sharp rise in oil prices, which it said could fuel inflation and cast a shadow on how India Inc performs over the months ahead.
Meanwhile, the US recorded the highest annual rise in retail prices in four decades at 7.9% in February as the Ukraine conflict stoked energy and commodity price inflation. Such high inflation in the US could force the Fed’s hand to take harder than estimated rate hikes.