Markets make U-turn to score weekly gains; Sensex gains 283 points

Snap two-week losing streak on softening US yields, Fed view

India’s benchmark indices rose for a second straight day on Friday amid softening US treasury yields and renewed optimism about the peaking of interest rates following the Federal Reserve’s decision to hold rates steady in its recent meeting.

The Sensex gained 283 points, or 0.4 per cent, to end the session at 64,364 on Friday, while the Nifty50 index rose 97 points, or 0.5 per cent, to settle at 19,231. For the week, the Sensex and the Nifty gained 0.9 per cent and 1 per cent, respectively, snapping their two-week losing streak.

Foreign portfolio investors (FPIs), which have been dumping domestic stocks since mid-September, net sold shares worth only Rs 12 crore on Friday, while domestic institutional investors were net buyers to the tune of Rs 403 crore, according to the provisional data from the stock exchanges.    

In October, FPIs had sold shares worth Rs 21,680 crore, the most since January. Analysts said FPIs could again become net buyers of Indian equities as India continued to grow despite global headwinds.

The Federal Reserve on Wednesday hinted that the recent rise in the 10-year US bond yields had reduced the need for further rate hikes. 
 

The Fed’s dovish comments rekindled hopes of its historic rate-hiking campaign coming to an end and spurred an equity rally across the globe. 

The yield on the 10-year US treasury fell from its multi-year highs and stood at around 4.6 per cent on Friday. Last month, the 10-year yields had breached the 5 per cent mark after 16 years.

“It’s clear from the post-policy statements that it is not tenable for the Fed to hike rates further. The Indian economy continues to be in a great shape and the strong macros are manifested in healthy earnings. There will be political shocks occasionally, but they are unlikely to be meaningful enough to drag down the market. If oil prices stabilise and interest rates don't rise further, the rupee will stabilise. And that will bring FPI money back into Indian equity markets,” said Saurabh Mukherjea, founder of Marcellus Investment Managers

The Fed and other central banks are also closely monitoring the Israel-Hamas war, with many fearing this could snowball into a wider regional conflict involving Iran and other oil-producing nations, which could result in a spike in crude oil prices. So far, the oil market hasn’t seen any major price disruption.

The lack of any negative surprises in corporate earnings and robust goods and services tax numbers have further boosted investor sentiments.

The market breadth was favourable on Friday, with 2,267 stocks advancing and 1,422 declining. More than half of the Sensex stocks gained. ICICI Bank rose 1.5 per cent and contributed the most to the Sensex gains.

“The spread of earnings has been decent. However, the margin tailwinds are likely to moderate in H2FY24, with the base effect coming into play and pick-up in some commodity prices. Given the ongoing result season, sector and stock-specific action will continue,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.