After the severe hammering on Thursday, equity benchmarks on Friday reversed almost all of those losses sending the Sensex vaulting by 732 points higher and the Nifty Index above the 10,450 mark. The rupee also staged a smart comeback and closed higher at 73.56 against the dollar.
Aided by gains in shares of auto, energy and metal stocks, the Sensex rose by 2.15 per cent at 34,733.58, while the Nifty closed higher by 237.80 points or 2.32 per cent at 10472.50. On Friday, the Sensex had plunged by 760 points in the wake of a global sell-off in stocks.
According to analysts, the smart rally in stocks and the subdued crude oil prices boosted the forex market sentiment. The rupee gained by 56 paise at 73.56 on dollar sales, capital inflows and the sharp fall in crude oil prices. Brent crude, which registered a four-year high of $86.74 a barrel last week, has now corrected sharply to a level just above $80.
Vinod Nair, head of Research, Geojit Financial Services, said, “the market smartly reversed from Thursday’s fall amid strengthening rupee and drop in oil prices. The recent drop in valuation kept the stocks attractive while investors may seek more clarity from upcoming quarterly results. Investors are also keen on the CPI inflation data in the context of volatility in rupee and oil prices. Worries about US Fed rate hike, US-China trade dispute and political uncertainties in India on account of upcoming state elections may impact the sentiment in the short-term.”
Hemang Jani, head – Advisory, Sharekhan, said, “the outlook for the market continues to look volatile in the short term with rising oil prices and a widening fiscal deficit account. We feel any dips in the market should be used to buy into quality names where there is future earnings visibility. We prefer the stocks from the consumption basket and feel both rural and urban areas will lead to demand revival in the coming months.”
V K Sharma, Head PCG & Capital Markets, HDFC Securities, said, “this (rally) was largely accomplished on the back of sliding crude oil prices and a rising rupee. Brent Crude oil has fallen 7 per cent from its recent highs near 86 and rupee has also appreciated one per cent from its recent low of 74.50. The Jigsaw puzzle for our markets is now finally falling into place.”
“The rupee marked first weekly gains in seven weeks buoyed by the government’s decision to raise import duties by up to 20 per cent on telecom equipment and components. It sought to reduce the dependence on imported goods in a sector with burgeoning demand, which could outstrip the value of oil imports in the coming years.”
According to Jani, short-term volatility may persist in the market, but the long-term prospects for Indian markets continue to look great. Indian markets took a beating in the past one month on various negative new flows ranging from FPI selling, IL&FS crisis, falling rupee, rising oil prices and US China trade tensions, leading to nervousness among investors.
US stocks surged Friday, joining a global rally in equities after two days of market tumult as trade tensions between the US and China seemed to ease, at least temporarily, with the countries planning to meet in November and the Treasury Department saying that China isn’t manipulating its currency. Treasuries slipped, the dollar was steady and crude climbed above $71 a barrel.
All major US benchmarks were up at least 1.5 per cent. The S&P 500 which is looking to snap a six-day losing streak totaling 6.8 per cent, climbed the most since April. Tech drove the strength as the Nasdaq 100 Index jumped more than 2 per cent. Strong trade data from China also buoyed markets, with the MSCI Asia Pacific Index rising from the lowest level since May 2017.