Benchmark and broader market indices jumped to their highest levels in a month on Tuesday on the back of positive global cues and buying by foreign portfolio investors (FPIs). The gains come ahead of the Reserve Bank of India’s (RBI) interest rate decision this week.
This was the third consecutive session of gains for benchmark indices and the BSE midcap index, while the BSE Smallcap index has registered gains for eight sessions in a row now.
On Tuesday, the Sensex closed 0.7% higher at 80,845.75 points, and the Nifty rose 0.8% to close at 24,457.15 points. In three sessions, the indices have gained 2.3% each, regained some ground after having skidded as much as 10% from the record high levels they hit during the last week of September.
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Shares of banks were outperformers on Tuesday, which market participants said was likely in anticipation of RBI’s policy decision on Friday.
Most economists believe the RBI is likely to keep interest rates unchanged despite the sharper-than-expected slowdown in growth. However, there are expectations of a cut in the cash reserve ratio (CRR), which is aiding bank stocks.
FPIs net bought Rs 3,665 crore worth of shares on Tuesday, as per provisional data. The updated data for Monday showed they bought Rs 3,794 crore.
The inflows from FPIs have raised hopes of a reversal of the trend after the aggressive sell-off seen in October and November. However, Sunil Jain, vice president of Elara Capital believes this is just a short-term phenomenon.
“There is definitely a short-term solace in a place where the selling kind of stalls and we see some marginal buying. But I do not expect it to last,” he said.
Global investors going back to the US ahead of regime change, China’s recovery and the gradual unwinding of yen carry trades are some of the key reasons Jain believes the fund flows to India may remain uncertain. “All these (factors) indicate there could be a weaker regime of flows,” he said.
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Nevertheless, experts believe the gains in the market back home are likely driven by hopes of a recovery in economic and earnings growth momentum in the second half of FY25 with a potential pick up in government capital expenditure given that Maharashtra elections are now over.
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