Eliminates market inflation concerns, 2.54% story; DII, retail investors are big

Stopping inflation concerns, equity markets rallied wisely on Tuesday and the Sensex stood at 1,344.63 points and closed at 54,318.47. The broader Nifty rose 417 points, or 2.54%, to 16,259.30. Investors’ wealth has increased by 12 trillion rupees.

Rally width, Nifty midcap and smallcap indices rose 2.7% and 3.4%, respectively, with a 15% print of wholesale inflation in April being somewhat surprising.

On Tuesday, February 15, the gains were the best of both gauges since February 15, when the rupee closed at a record low of 77.57 against the dollar. Experts say that relaxing restrictions on Kovid-19 in China has helped to increase sentiment.

Indian markets have become significantly more resilient, despite selling heavily by foreign portfolio investors (FPIs). Since January, they have sold $ 20.1 billion worth of equity, including $ 282.65 million, on Tuesday. Since October, they have raised 25.7 billion. Domestic companies like retail investors have become big buyers. On Tuesday, local domestic institutional investors bought ্যের 295.8 million worth of shares, according to the exchange’s provisional data.

But strategists are wary. BofA Securities lowered its Nifty50 target from 17,000 to 16,000, citing faster tightening and higher inflation than expected. “Any easing of the current volatile crude price, changes in FII flows and a move below INR could be an upward risk in our view, when global inflation is outpacing expectations and this is a key negative risk as a result of the expected rate hike.” Brokerage opinion.

Against this negative background, the Nifty’s valuation multiple on the BofA has narrowed to its LTA (long-term average) 15.8x, pushing the index to 13,700 which indicates a 15% decline from the current level. Bloomberg data shows that the Nifty is currently trading at 18 times its one-year forward earnings estimate.

Milind Muchala, Executive Director, Julius Bare India, believes that the markets will be affected by the central bank’s activities, especially the US Fed and the growing news flows about inflation trends. “There could be some technical pull-backs in the short term, given the excessive pessimism and the over-selling situation we’re in,” he said. Among sectoral indices, the Nifty Metal Index rose the most at 6.9%, followed by oil and gas and media, each rising more than 3%.

Of the 3,462 stocks traded on the BSE, 2,607 scrips rose and 737 ended red. However, the width of the month has come down to 0.72 so far after exceeding the number of advances in both March and April. As of Tuesday’s close, the combined market capitalization of BSE-listed companies stood at 255.55 trillion. Tuesday’s rise has reduced the Sensex’s year-to-date loss to 6.8% from 9.4% seen last week.