Indian shares rallied on June 17 as crude oil prices eased, overall sectoral demand picked up and the US Federal Reserve's policy decision offered a boost to markets, extending their positive trend for the fourth straight session.
Key Highlights
- Sensex gained 347 points while Nifty closed above 24,000 for fourth session.
- Falling crude oil prices and Fed optimism lifted equities across major sectors.
The BSE Sensex climbed 347.14 points, or 0.45%, to close at 77,155.62 after touching an intraday high of 77,218. Meanwhile, the NSE Nifty 50 gained 96.55 points, or 0.40%, to settle at 24,085.70, after hitting a day's high of 24,108. In the past four sessions the Sensex and Nifty have gained around 4% and 4.5% respectively.
Broad-Based Buying Supports Market Rally
Market breadth continued to be positive with 10 out of 16 major sectoral indices making green moves. But the broader markets did better than the benchmarks too, as small caps advanced by almost 0.8% and mid caps by about 0.5%, showing that there was good participation beyond the front line stocks.
PSU banks, metals, consumer durables, capital goods, power and IT stocks saw significant buying interest in the sectoral lists. The stocks of the auto and realty sectors, on the other hand, experienced some profit-taking after recent rallies.
The top gainers of the rally were heavyweights like Trent, Bharat Electronics and Hindalco Industries.
Falling Crude Prices Boost Investor Sentiment
One of the big reasons for the recent robustness in the market is the drastic drop in crude oil prices globally.
Near three-month lows prompted by a drop exceeding 5% in the previous session saw Brent crude futures hover around $79 per barrel. For India, which is among the world's biggest crude importers, lower oil prices are seen positively as it would help contain inflationary pressure, enhance trade surplus and ease concerns over rising input costs of the corporate sector.
A weakening of geopolitical sentiment, as progress appeared to be made on a peace plan between the U.S. and Iran, has also helped prices of crude come down somewhat, which has helped stabilize energy markets and global supply chains.
IT Stocks Gain Ahead of Fed Decision
Investors took the lead to stocks of information technology companies, which rose 0.9% as they braced for the US Federal Reserve's policy decision.
The Fed is all but certain to hold interest rates at 3.5%-3.75% at its first policy meeting with new Chair Kevin Warsh. But, the market continues to heed the central bank's remarks on inflation, growth and interest rate expectations.
Any rate cut or change in economic sentiment projections by the Fed may have an impact on investor sentiment in the IT space, as there is a strong possibility that this industry earns a substantial part of its revenues from foreign customers, especially the United States.
Also Read: Rupee Hits Six-Week High as Oil Falls and Bond Inflows Rise
Rupee Strengthens as Foreign Flows Improve
The Indian rupee also gained ground, ending at 94.52 against the US dollar. The currency gained from the oil prices, and the continued interest of foreign investors in the Indian financial markets.
The easing of energy prices and the risk sentiment has further boosted the market sentiment of continued capital inflows in Indian equities and bonds, according to market participants.
Outlook
Investors are keenly watching the outcome of the Federal Open Market Committee (FOMC) meeting, crude oil prices, activity of foreign institutional investors (FIIs) and geopolitical developments in the coming days.
Oil markets are likely to remain stable, with global signals remaining positive, according to analysts, who expect the current bull market to continue. But that will be insufficient as the US Federal Reserve's and global economic indicators' comments will be key for the market's near-term move.
Indian stocks are looking good at the start of the second half of June with benchmark indices making some fine gains in psychological levels and with broad participation picking up.
