Markets gain 1% helped by FPI buying and normal monsoon predictions

The domestic equity markets gained 1% on Friday encouraged by normal monsoon projections that can propel domestic growth expectations further. Better than expected Q1 US GDP data and jobless claims already had helped the markets see a positive start though US debt ceiling impasse continues.

The Sensex, with gains of 1.02% comprehensively crossed the 62000 mark and ended the day at 62,501.69. The Nifty too, with gains of 0.97%, was just shy of the 18500 mark. Both Foreign portfolio Investors (FPI) and Domestic Institutions (DII) DIIs were buyers in the markets providing strong support. FPI ‘s that have remained regular buyers in the market in May bought a provisional ₹350.15 crore on Friday.

The India economy growth expectations remain strong , but there were some concerns on El Nino impact. Nevertheless, Indian Meteorological Department has retained its forecast of a normal monsoon and that has provided reassurance and eased some part of concerns, even though IMD expects 'below normal' rainfall in June, said Deepak Jasani Head of Retail research at HDFC Securities.

The fact that India may have limited impact of debt ceiling crisis and has strong growth outlook, the FPI continue their buying spree in Indian equities which is supporting upside in the markets.

Upmove on Friday showed strength with wider participation. Nifty could now trade in the 18660-18393 band over the near term, said Jasani.

FMCG, IT, Realty, Metals and PSU Bank indices were major gainers, clocking more than 1% gains as buying was seen in all indices. The heavy weights like Reliance Industries led the gains for Nifty as Sun Pharma, Hindalco Industries, Hindustan Unilever, and HCL Technologies were amongst key gainers.

The broader markets remained buoyant, and the midcap index made a new record high as well. BSE mid cap index scaled highs of 26827.74 on Friday. The strong Q4 results have added to confidence on the Mid cap stocks that have been catching up and FPI buying must also be supporting said analysts. The economic growth prospects are adding to mid-cap prospects too

“ The domestic market defied the trend and experienced a widespread rally, driven by the strong growth forecast for the Indian economy", said Vinod Nair, Head of Research at Geojit Financial Services. With the upcoming Q4 GDP data, it is anticipated that India's FY23 GDP will marginally surpass the earlier projected 7.0% growth rate added Nair.

The expectation of a normal monsoon and consistent FII buying further boosted confidence among domestic investors, said Nair.

Even Goldman Sachs has raised the 2023 GDP growth forecasts slightly on a net export boost. This is based in their expectation of the strong trend in services exports and lower merchandise imports continuing and thereby a net export boost in CY23, with real exports growth above 4% yoy and flat real imports growth in CY23. They expect Q1 CY23 GDP growth at 4.9% yoy and take their CY23 GDP forecast higher by 30bp to 6.3% yoy.