Markets shrug off US Federal Reserve's hawkish remarks, rise 1.2%

RIL, IT stocks lead rally; Sensex set to reclaim 58K mark

The Indian markets rose more than 1 per cent on Tuesday, led by gains in index heavyweight Reliance Industries (RIL) and information technology majors Infosys and Tata Consultancy Services (TCS), amid favourable global cues. The gains came despite hawkish statements by US Federal Reserve Chairman Jerome Powell and elevated oil prices.

After opening weak, the Sensex managed to gain 697 points, or 1.22 per cent, to end at 57,989. The Nifty, on the other hand, rose 198 points, or 1.16 per cent, to close at 17,316.

Tuesday’s gains came on the back of positive inflows from overseas investors to the tune of Rs 385 crore. Experts said Ukraine peace hopes were driving risk sentiment across the globe. Turkey had said on Sunday that Russia and Ukraine had made progress on their negotiations to halt the war, and the two sides were close to an agreement.

“Markets have been putting much store in this outcome, somewhat naively in my opinion…Any headlines suggesting negotiation progress will see a sharp reversal by oil and a rise by equities in the short term,” said Jeffrey Halley, senior market analyst, Asia Pacific, Oanda. 

The spiralling prices have forced central banks, including the Fed, to prioritise inflation over facilitating growth. Central Banks, for a large part of last year, had termed inflation as transitory.

The Russia-Ukraine war has led to a rally in commodity prices, including oil and metals, amid concerns of supply disruptions. The conflict worsened the inflationary pressures caused by a jump in demand as countries opened up following shutdowns necessitated by the pandemic.

Powell on Monday said the central bank should move expeditiously to raise rates to tame inflation. If required, he said, the Fed would raise rates by more than 25 basis points more than once. The Fed chief reiterated that the central bank would start reducing its balance sheet by May.

“The Fed chairman’s statement could have been hawkish during normal times. Now the geopolitical situation is overshadowing everything else. Markets will remain volatile until some good news comes out of the Russia-Ukraine talks,” said U R Bhat, co-founder, Alphaniti Fintech.

RIL, which has the highest weighting in the Sensex and Nifty indices, rose 2.5 per cent and accounted for more than a fourth of the gains made by the benchmark indices. Experts said higher crude prices could boost the gross refining margins for India’s most valuable firm. Crude oil prices have risen 11 per cent in the last four sessions, with Brent crude hovering around $115 per barrel.

“The gain in Reliance helped the indices. But other than that, there was nothing much for markets to cheer. Domestic investors were sellers after a long time,” said Bhat. Domestic institutional investors sold shares worth Rs 600 crore on Tuesday.

TCS gained 2.1 per cent and Infosys rose 1.8 per cent. The two accounted for a fourth of the index gains.

The market breadth was slightly negative, with 1,858 stocks declining against 1,540 advances. Barring four, all Sensex stocks gained. Oil and gas and IT stocks gained the most, and their sectoral indices on the BSE gained 1.9 per cent each.