Sensex regains 20,000 level as FIIs reverse bearish F&O bets

Analysts say the future direction of the market will depend on the upcoming result season and global developments

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Stock markets rose for a third straight day on Monday as investors cheered June's wholesale inflation data, which was in line with expectations. Notably, the Sensex crossed the psychologically-important 20,000-mark after one-and-a-half months. However, the gains were limited with investors turning cautious about the market's near-term prospects as foreign institutional inflows have turned erratic.

The BSE Sensex closed at 20,034 on Monday, up 0.4 per cent from its previous close, while the NSE Nifty closed at 6,030, up 0.4 per cent.

"Investors in the market are being cautiously optimistic. The market is being propped up by rise in certain stocks from the large-cap and pharma stocks," said Rikesh Parikh, vice-president of equities at Motilal Oswal Financial Services.

Wholesale price index (WPI) data for June, released on Monday, came in at 4.86 per cent from a year ago. According to analysts, the whole-sale inflation number came as a slight relief to optimists after consumer inflation numbers released on Friday after market hours came in higher at 9.87 per cent against 9.31 per cent seen in May.

Foreign institutional investors (FIIs) were net sellers to the tune of Rs 227 crore on Monday, according to provisional data. Selling by these investors have abated after US Fed Chairman Ben Bernanke said the central bank would not roll back its third round of massive bond buying programme, known as quantitative easing (QE3), till it sees a sustainable recovery in the economy.

"Foreign investors are returning but not as much as they did before. While there is not much selling pressure in the market, the buying activity of these investors is also restricted to certain stocks and sectors," said Parikh.

In derivatives, FIIs have reversed their bearish bets on the Nifty of late.

"Overseas investors are currently net long on the index futures to the tune of Rs 3,000 crore. Given the strength in the global markets, the momentum in the domestic market is also quite strong, which could take the Nifty to 6,100 levels," said Yogesh Radke, head (quantitative research) at Edelweiss Financial Securities.

However, this was not happening across all sectors and not in a big way either, analysts said.

Market players said that movement was seen in stocks such as Reliance Industries (RIL), which moved up ahead of its results announcement this week. RIL shares, which will report its earnings numbers on July 19, have been gathering steam after the announcement in the gas price hikes. RIL closed the day in the green at Rs 895.75 a share, up 0.7 per cent.

Analysts said the future direction of the market would depend on the upcoming result season and global developments.

"This market will take cues from the corporate results but still will be largely driven by global events and the statements coming out of US. Any disappointment on that front could see the markets correcting," said Radke.