Earnings optimism lifts markets, FPI buys offset concerns over oil prices

Short-covering, FPI buying help offset concerns over high crude oil prices

The benchmark indices snapped their three-day losing streak, helped by better-than-expected earnings by corporates such as UltraTech cement. 

In addition, a new record high for the S&P500 — benchmark index for US equities — helped boost investor sentiment towards risky assets. 

The Sensex climbed 1.3 per cent, or 490 points, to close at 39,055 on Wednesday, its steepest daily gain in more than six weeks. The Nifty closed at 11,726, up 150 points or 1.3 per cent — its biggest advance since January 31.

Short-covering ahead of expiry of the April series derivatives contracts on Thursday spurred buying. 

On Monday, both the Sensex and Nifty had posted their biggest decline of 2019, amid spiraling oil prices following US sanctions on Iran.

Overseas investors stepped up buying, after taking money off the table a day earlier. On Wednesday, foreign portfolio investors (FPIs) bought shares worth Rs 975 crore after pulling out Rs 167 crore on Tuesday, data showed.

The India VIX index, a gauge for market volatility, also cooled off from its 3-year highs amid buying by FPIs. The gauge ended at 23.7, down 3.8 per cent.

“FPIs have been taking long positions in speculative index futures, which led to today’s rise. The markets might go up tomorrow because of the bullish positions of FPIs. After Thursday, it will be a new set of things to look, at considering crude has gone to $75,” said Abhimanyu Sofat, vice-president (research) at IIFL.

Siddhartha Khemka of Motilal Oswal said positive FPI flows and short-covering pulled the market in the last hour. The UltraTech results were good, and it did have some sentimental impact, he added. 

Market players said the earnings optimism has helped investors set aside concerns over high oil prices. 

According to Bloomberg data, five of 49 Nifty companies to have reported earnings so far have beaten or matched expectations. 

Market participants expect the indices to remain volatile in the near term, due to the elections and earnings outcome. The price of crude oil will be monitored closely along with the currency movement, said experts.

Brent crude futures traded $74.2 a barrel, down 30 cents from their previous close. Brent prices have risen 13 percent since March and 40 per cent in 2019.

Barring six, all constituents of the Sensex pack ended higher. HCL Technologies rose 3.4 per cent; ONGC, IndusInd, YES Bank, Bharti Airtel and HDFC rose more than 2 per cent each. Tata Motors fell 3.33 per cent — the most in the Sensex pack. 

All the sectoral indices of the BSE closed Wednesday’s session higher, barring auto. The BSE Oil&Gas rose the most, at 2.32 per cent.