The market rebounded 1 per cent on Thursday after seven straight sessions of losses, led by gains in index heavyweights such as Infosys and HDFC. A sharp rally in pharmaceutical stocks on the back of encouraging earnings reported by Cadila Healthcare and Cipla also boosted sentiment. The BSE Sensex closed at 34,413.16, up 330 points, or 0.97 per cent — the most this year. The Nifty50 index rose 100 points, or 0.96 per cent, to end at 10,576.85, with 41 of its components ending in green. Despite weak global cues, the market traded positive through the day, as calm returned after a week and volatility subsided. The India VIX index, a gauge for market volatility, fell 8.7 per cent to 17.8. Market players said the gains could be short-lived as overseas investors continue to remain in risk-off mood. Foreign institutional investors (FIIs) sold shares worth Rs 23 billion, while their domestic counterparts provided buying support of Rs 24 billion. FIIs have pulled out Rs 57 billion from domestic stocks this month, amid hardening of bond yields in the US, which have flagged concerns over high inflation. Most global markets have come off sharply this week on fears that the US Federal Reserve will raise interest rates aggressively to keep inflation under check.
Higher rates in the US could put an end to easy liquidity that has pushed up the prices of risky assets globally, according to experts.“A strong underpinning of the rally was the fact that interest rates were very low and money was gushing into stocks. The days of close to free money in terms of interest rates may be coming to an end. Given that growth has picked up globally, unemployment rates are low, commodity prices have picked up and wage rates are growing in the US, inflation may make a comeback and there is no reason now for Europe or Japan to keep pumping in tens of billions of dollar equivalents into their markets. Bond yields the world over are reflecting this,” said Rajeev Thakkar, chief investment officer, PPFAS Mutual Fund. In the previous six trading sessions, the Sensex and the Nifty have lost nearly 6 per cent each, matching a losing streak of the same duration in September. Analysts said they expected global markets to stabilise, but said caution would remain in India amid continued worries that accelerating inflation would force the Reserve Bank (RBI) to raise interest rates. The RBI on Wednesday held rates steady and kept its policy stance “neutral”, with analysts saying the central bank’s future actions would depend on inflation. “The market is in a trading zone with a broad-based recovery. The worst, as far as downside concerns and short-selling, is more or less done. But at the same time, the markets are not in clear water yet with concerns over inflation,” said Dharmesh Kant, an independent market expert. Drug major Sun Pharmaceutical Industries rose 6.3 per cent, the most among Sensex components, followed by Dr Reddy’s, which added 3.2 per cent. State Bank of India rose 3 per cent, while Infosys gained 2.3 per cent. Most BSE sectoral indices ended with gains as 2,197 stocks advanced on the BSE and only 625 declined.