Equities rebound on easing recession worries; HDFC twins back in green- QHN

Easing of fears of a recession in the West and gains in financial stocks helped Indian equity benchmarks end Monday on a high and recoup all the losses made in the previous session.

The benchmark Sensex closed at 61,764 points, a gain of 710 points or 1.16 per cent — most for the index since March 31. The Nifty50 ended the session at 18,269 points, with a gain of 195 points or 1.08 per cent.

As a result, the 30-share index is now 1,520 points or 2.4 per cent from its all-time high while the 50-share benchmark is 549 points, or 2.9 per cent, away from its peak. Both indices had registered their record marks on December 1 in 2022.

Most global markets rose on Monday as risk sentiment improved, following a sharp rise in the US markets on Friday. The US job numbers, released on Friday, brought down recession fears amongst investors. The nonfarm payrolls rose 253,000 last month, against an expected increase of 185,000. The unemployment rate fell back to a multi-decade low of 3.4 per cent.

However, the outlook for economic growth and corporate earnings is still hazy as there is ambiguity regarding whether the rate hikes by central banks around the world have peaked. While the US Federal Reserve (Fed) indicated that it might take a decision on pausing rate hikes based on data, its Eurozone counterpart has made statements to the contrary.

A statement by European Central Bank (ECB) council member Klaas Knot stressed the need to hike rates amid an inflation rate that is too high.

Even the US job numbers have given rise to speculation amongst a section of the markets that the Fed might keep the door open for an 11th straight rate hike in June.

The rise in finance stocks, including the HDFC twins (HDFC and HDFC Banjk), also helped the indices post gains. Friday’s losses were largely on account of the decline in HDFC duo, after global index provider MSCI announced that their merged entity would have a lower weighting than what the market was pencilling in. On Monday, HDFC Bank rose 1.2 per cent and contributed the most to Sensex gains while HDFC rose 1.3 per cent.

“Firm global cues triggered an upbeat start, which further strengthened with buying in select heavyweights as the session progressed. Participants are experiencing a roller coaster ride in the index for the last three sessions; however, the overall bullish tone is somehow capping the damage. We feel traders should continue with a cautious approach until we see some stability for a session or two,” said Ajit Mishra, vice-president, technical research at Religare Broking

Positive quarterly earnings numbers and healthy macroeconomic data further kept investor sentiment high. The manufacturing Purchasing Managers’ Index (PMI) and goods and services tax (GST) collection during April signalled the resilience of the Indian economy, despite global headwinds.

Going forward, investors will be keenly tracking the release of the US core consumer price index, which excludes food and energy, and is tracked and watched by the Fed.

“For the week, we expect the market to continue with its positive structure, dictated by corporate earnings and consistent buying by FPIs (foreign portfolio investors). Investors would watch out for economic cues,” said Siddhartha Khemka, head of retail research at Motilal Oswal.

On Monday, the market breadth was strong, with 1,998 stocks advancing and 1,654 declining. Barring three, all the Sensex stocks gained. Reliance Industries rose 1.2 per cent and contributed the most to index gains.