Markets extend rally to fifth day; Sensex up 935 pts, Nifty tops 16,850

Oil prices drop sharply on Russia-Ukraine talks

India’s benchmark indices gained for the fifth straight session on Monday ahead of a new round of talks between Russia and Ukraine. The falling oil prices and easing of selling pressure from foreign portfolio investors (FPIs) helped the markets extend gains to over 6 per cent from last week’s lows.

The Sensex jumped 935 points, or 1.7 per cent, to end the session at 56,486, while the Nifty settled at 16,871, gaining 241 points, or 1.5 per cent. Last week, both the gauges had dropped to their lowest level since July 2021.

Brent crude was trading at $108 a barrel around 8 pm IST, more than 6 per cent down from its previous day’s close and 20 per cent off last week’s high. Russian and Ukrainian negotiators met via videoconference on Monday, with Kyiv insisting on a ceasefire and immediate withdrawal of troops.

“Investors are hoping that there will be some agreement in the next two-three days,” said Andrew Holland, CEO, Avendus Capital Alternate Strategies.

“The fall in oil prices is a relief. A bit of short-covering might also have helped. Moreover, the lifting of restrictions on HDFC Bank by the RBI also lifted sentiments for banking stocks,” Holland added.

Shares of HDFC Bank surged 3.25 per cent, with the lender contributing the most after Infosys to the index gains.

Among Asian markets, the Hang Seng and Shanghai Composite Indices were trading lower after China reported more than 1,800 cases of Covid-19 on Sunday, the most daily cases in two years. FPIs on Monday sold shares worth just Rs 177 crore. In the past three sessions, they have significantly slowed down their selling after pulling out close to $1 billion in each of the preceding three sessions.

Investors will be keenly watching the US Federal Reserve’s meeting this week. The Federal Reserve is expected to begin hiking interest rates to tame inflation, beginning with a 25-basis point increase.

The Federal Reserve had kept the rates close to zero since the beginning of Covid-19. However, consumer price inflation in the US hitting a 40-year high forced the US central bank to prioritise fighting inflation. Consumer prices have also spiralled in the eurozone and the UK.

"A 25 bps hike is already priced in. Investors will be more keenly watching the Fed chief's commentary on inflation and how they are planning to control it," said Holland.

Inflation was high even before the Russia-Ukraine conflict, and the war has further hiked commodities prices. Investors are worried that a lack of monetary support and higher commodity costs will further affect the economic recovery. Meanwhile, speculations are rife that China may introduce more monetary easing measures to mitigate the effects of economic slowdown.

"The Nifty has seen a strong recovery in the last five days. The positive momentum in the market is likely to continue till the peace talks don't fail, and the commodity prices continue their downward trend. While the IT sector continues to shine in the current volatile environment, some value buying is emerging in select banking stocks. Also, a few commodity-related counters like sugar, paper, and fertilisers are likely to remain in action," said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.

The market breadth was slightly strong, with 1,749 stocks advancing and 1,725 declining. More than four-fifths of the Sensex stocks gained. Banking stocks gained the most, and its sectoral index gained 2.3 per cent on the BSE.