Markets rebound as US, North Korea tension eases

Analysts expect positive momentum in Indian markets to resume soon as the global tensions subside

The Indian markets rebounded following last week’s near-five per cent slide, as investor sentiment improved after tension between North Korea and the US showed signs of easing. The benchmark Sensex gained 235 points, or 0.75 per cent, to close at 31,449. Snapping a five-day losing streak, the Nifty 50 closed at 9,794, up 83 points, or 0.9 per cent. The broader markets outperformed, with the BSE mid- and small-cap indices gaining 2.5 per cent each.

Most Asian markets, too, rallied 1 per cent, while the European stocks bounced back on opening. According to market players, most stocks had been oversold in last week’s correction, which triggered value-buying from investors. Meanwhile, the weak US inflation data also boosted investor sentiment as they reduced the prospects of a rate hike by the US Federal Reserve later this year.

“In the last few sessions, we have seen a spike in market volatility due to a combination of international and domestic factors. Volatility may continue in the short term. From a longer-term perspective, the Indian market will do well on the back of improvement in macro-economic parameters,” said Raamdeo Agrawal, managing director at Motilal Oswal.

Foreign institutional investors (FIIs), however, continued to pull out money from domestic stocks. On Monday, FIIs sold shares worth Rs 1,638 crore, taking their three-day selling tally to nearly Rs 4,000 crore. Domestic institutions provided key buying support, buying shares with Rs 1,619 crore, provisional data from stock exchanges showed.

“With the kind of rally global markets, including India, have witnessed in the last three months, a correction was imminent. Trigger came in the form of the escalating tension between US and North Korea. If the issue plays out longer, it could have serious implications on the equity markets. Any correction in the current markets should be a good buying opportunity for investors, especially in companies with good earnings visibility,” said G Chokkalingam, founder, Equinomics Advisory. Last week, most risky assets got sold into, while safe-haven assets, like gold and developed world bonds, saw buying interests after a stalemate between the US and North Korea threatened to snowball into a war. The situation seems to be stablising now, as officials from the countries have started to play down the possibility of a full-blown war. 
 

On Monday, the market breadth remained largely positive with 1,874 companies positing gains against 695 posting declines. The rebound was largely led by the beaten down sectors, including pharmaceutical and real estate. 

Index heavyweights Reliance Industries and HDFC gained 1.7 per cent and 1.2 per cent, respectively, contributing nearly 80 points to the Sensex gains. Shares of Cipla and Sun Pharmaceutical Industries rallied close to five per cent each, most among Sensex companies.

Real estate stocks, which witnessed a sharp correction last week, also made a strong comeback. The BSE index for realty shares climbed six per cent, with shares of DLF zooming 16.5 per cent.