Benchmark indices rose for the second straight day on Tuesday, as investors lapped up beaten down quality stocks on firm global cues. Softening crude oil prices further boosted the investor sentiment.
Barring China, most Asian indices gained in Tuesday’s trade, with Taiwan TAIEX and Hang Seng climbing 2.4% and 1.9%, respectively. While the Nikkei 225 gained 1.8%, Korea’s KOSPI and Jakarta Composite rose about 1% each.
Reliance Industries, along with Infosys and Tata Consultancy Services, contributed over a third of the gains on the Sensex on Tuesday. While the Sensex added 934.23 points or 1.8% to settle at 52,532.07 points, the broader Nifty50 closed 288.65 points or 1.9% higher at 15,638.80. Both the indices marked their best single-day gains since May 30.
“Metal, state-owned banks and technology stocks witnessed bargain hunting after suffering heavy losses last week on fears of aggressive rate hikes,” said Shrikant Chouhan, head of Equity Research (Retail), Kotak Securities.
Among the Sensex pack, Titan surged close to 6% on Tuesday, followed by State Bank of India and Tata Consultancy Services, each gaining anywhere between 3% to 4%. Shares of Titan have come off about 30% over the last three months through Friday, whereas stocks of SBI and TCS have corrected 19.7% and 23.1%, respectively, from their recent highs.
The relentless selling by foreign portfolio investors continued even on Tuesday. While the FPIs sold $345.94 worth of shares, local institutional investors bought $392.71 million, provisional data on exchanges showed. So far in 2022, overseas investors have offloaded a record $27.6 billion worth of shares, Bloomberg data showed.
According to market participants, foreign outflows is unlikely to reverse, unless there is any moderation in valuation. UBS India, which has a year-end target of 16,000 for Nifty50 observed, “India remains expensive relative to EM. Therefore, while we believe the likelihood of FII selling is low, we are not confident of a quick reversal in FII flows.”
Brent prices cooled off to $116 per barrel level after hitting $123.58 per barrel in the second week of June. Nevertheless, the rupee hit yet another low of 78.08 on Tuesday. The local currency has declined 4.8% against the greenback so far in 2022. “With forward premium on a % of spot trading at 11-year lows, there will be more of importer demand and less of exporter selling. Carry traders may be disincentivised due to such low premium,” observed Anindya Banerjee, VP, Currency & Interest Rate Derivatives at Kotak Securities.
However, strategists remain cautious on the Indian market with a range-bound view. According to analysts at Bernstein, the Nifty 50 may bottom out at a P/E multiple of 13 times, which implies that the index could fall to 13,500 points. “We retain our cautious but range-bound view on the market, with 13,500-16,000 serving as the range,” wrote Bernstein in a strategy note.