NEW DELHI: The anticipation of a less aggressive US Federal Reserve policy stance in the near future after a 75 basis points increase in July seems to have lifted investors’ sentiments worldwide, including in India.
Adding to it, a positive quarterly (Q1FY23) show by financial heavyweights and foreign investors turning net buyers in July has pushed the benchmarks - Nifty and Sensex- to a three-month high.
The two indices soared for the third straight session on Friday and ended the month of July with a gain of over 8%, the best monthly gain since August last year. On Friday, Sensex ended 712 points, or 1.25% higher at 57,570, while the Nifty50 shut shop at 17,158, up 229 points or 1.35 per cent on the back of heavy buying seen across the metal and IT shares, along with index heavyweights like Reliance Industries, HDFC twins, Sun Pharma, and Bajaj Finance surging 1.24% to 5.45%.
“The Fed’s 75 basis point rate hike was expected, and their comments dismissing the possibility of a recession and hinting at a slower pace of rate hikes in the upcoming months boosted global sentiment. As a result, the Indian rupee strengthened, potentially attracting foreign funds into the domestic market. On the domestic front, healthy quarterly numbers provided a cushion of relief,” said Vinod Nair, Head of Research at Geojit Financial Services.
Foreign investment rebounding to green has been a major source of relief for the street this month. The National Securities Depository Limited (NSDL) data as of July 29 shows FPIs have turned net buyers for the month. The net buy figure is `7.39 crore for July. This is in sharp contrast to the FPIs (foreign portfolio investors) sell figure of `50,145 crores in June.
“FPIs were buyers for 9 days in July. This reversal in FPI activity is one of the important factors driving the market rally in July,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He added that the steady decline in the dollar index from above 109 to around 106.20 now has slowed down capital outflows from other markets to the US. Good Q1 results from financials have resulted in increased demand for these stocks. Change in FPI strategy has led to short covering in financials and IT too in recent days.