The benchmark Sensex at the BSE reclaimed the 60,000-mark after more than four months, on the back of moderating inflation, decline in global commodity prices and strong inflow from foreign portfolio investors (FPIs) into the domestic markets who have invested a net of Rs 36,716 crore in August till date.
The Sensex gained 417.92 points, or 0.7 per cent, to close at 60,260, and the Nifty at NSE rose 119 points, or 0.67 per cent, to close at 17,944 on Wednesday.
Over the last two months, the 30-share Sensex has jumped by 17.3 per cent from 51,360 to close at 60,260 on Wednesday. The rally has not been limited to the large-cap, but seen even in the mid- and small-cap companies. In the same two-month period, the BSE mid-cap and small-cap indices rallied 18.2 per cent and 17.4 per cent, respectively.
At the heart of the recent rally has been the inflow of FPIs. While foreign investors were major sellers between October 2021 and June 2022, selling more than Rs 2.5 lakh crore worth of equity holdings in India, they turned net investors in July and have come back with strong investments in August. In July, the net FPI investment stood at Rs 4,989 crore and that in August till date amounts to more than Rs 36,716 crore. On Wednesday, FPIs pumped in a net of Rs 2,347 crore.
Experts say that while domestic investors, both retail and institutional, continued to support equity markets with their inflows over the last 10 months, the re-entry of FPI is providing a fresh thrust to markets.
A key factor in the FPI mood turning positive has been the moderation in domestic inflation over the last couple of months with the CPI numbers for July coming down to 6.7 per cent. The inflation numbers had hit 7.8 per cent in April following a sharp rise in global crude oil prices and international commodity and food prices. However, as the inflation has started to soften, it has lifted investor sentiments as a decline in inflation would lead to margin improvement for companies and also benefit India as an economy on account of current account deficit and fiscal deficit. Even globally there has been softening in inflation and the US reported a decline in July inflation to 8.5 per cent from 9.1 per cent in June.
Shrikant Chouhan, head of equity research at Kotak Securities, said, “Bulls on Dalal Street kept the momentum going as Sensex zoomed past the psychological 60,000-mark and Nifty inched towards 18000 level on the back of softening inflation and strong FII buying in the current month. While global factors remain hazy, India is seen as a bright spot in today’s challenging times.”