Markets back in green aided by GDP numbers

Sensex, Markets, Jerome Powell, central bank, Nifty, Bank Nifty

Mumbai: Indian equities rose over 1% on Wednesday, dodging the overnight sell-off on Wall Street after US Federal Reserve chair Jerome Powell signalled the central bank will consider accelerating the withdrawal of its super-accommodative liquidity programme. The expansion in India’s economy in the September quarter lifted sentiment but money managers warned the optimism could be temporary as the market grapples with uncertainty over the Omicron variant of Covid-19.

The Sensex ended 619.92 points or 1.1% up at 57,684.79 while the Nifty ended 183.70 points or 1.08% up at 17,166.90. The volatility index cooled, with India VIX ending down 8% at 19.45. Bank shares led upsides with the Bank Nifty index gaining almost 1.9% as traders covered some of their bearish bets in the belief that they were oversold.

India’s gross domestic product grew 8.4% in the September quarter, faster than any other major economy during the period.

“The GDP data is of the past quarter but now the factors that are dominating the market are the selling from foreign investors’ side and concerns about whether Omicron will cause another wave of disruption,” said Harsha Upadhyaya, chief investment officer, equity, Kotak Mahindra Asset Management Co.

Foreign portfolio investors (FPIs) withdrew ₹5,945 crore from Indian stocks in November after being sellers to the tune of ₹13,550 crore in October.

Sensex, Markets, Jerome Powell, central bank, Nifty, Bank Nifty

FPIs Sold Shares Worth ₹2,765.8 crore

The net outflow reading in November would have been higher but for investments in the Paytm initial public offering. FPIs sold Indian shares worth ₹2,765.8 crore on Wednesday while domestic institutional investors (DIIs) picked up shares worth ₹ 3,467 crore. Tuesday marked the eighth consecutive session of selling by foreign investors. They have sold shares worth about ₹ 30,350 crore during this period.

The sell-off by foreigners has been part of the risk-off sentiment sparked by the Fed’s indications on tapering of asset purchases amid inflationary pressures. On Tuesday, Powell indicated to the Senate Banking Committee that he no longer considers high inflation as “transitory” and that the Fed would consider the timeline for scaling back its bond-buying programme at its December meeting.

Money managers said steep share prices could have accelerated the FPI selling. “Valuations continue to be on the higher side and investors who participated in the rally have been sitting on handsome profits. If the worries continue, there could be some amount of profit booking,” Upadhyaya said.

Indian stock indices have fallen about 8% from all-time highs in October. But even after the recent decline, the Nifty is trading at an estimated price-to-earnings ratio of 21, which is above the valuations of other emerging markets.

‘Nifty may Rebound to 18k’

ICICI Securities said the recent weakness is temporary and the Nifty could rebound to 18,000.

“The ongoing correction is a part of a structural bull market that would make markets healthy and pave the way for the next leg of the up move,” said the brokerage in a note. “We expect the current corrective phase to find its feet around key support of 16700-16500 and undergo a base formation.” If the Nifty manages to break above 17,500, it could touch 18,000 in December, said ICICI Securities.

“Since April 2020, all major corrections got arrested within 9-11% while sustaining above five months’ EMA (exponential moving average),” the brokerage said. “Buying in each of these corrections has been fruitful for investors as index subsequently retested previous highs.”

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