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Nifty scales all times high; declining crude prices aid investor confidence

The Nifty50 rose 0.27% to end the day at 18,562.75, while the S&P BSE Sensex climbed 0.34% to settle at 62,504.80. (Photo: Mint)Premium
The Nifty50 rose 0.27% to end the day at 18,562.75, while the S&P BSE Sensex climbed 0.34% to settle at 62,504.80. (Photo: Mint)

While the dovish minutes from the Federal Reserve’s November policy meeting have meant easing of concerns on steep rate hikes, the positives continue to accrue from falling crude prices and also regular buying by foreign portfolio investors

MUMBAI: Indian stock markets rose for the fifth consecutive session on Monday, with the benchmark Nifty50 scaling a record high. Gains were led by oil marketing companies which climbed higher as crude prices fell following the fresh surge in covid cases in China’s cities, and protests against authorities’ stringent zero-COVID policies.

The Nifty50 rose 0.27% to end the day at 18,562.75, while the S&P BSE Sensex climbed 0.34% to settle at 62,504.80.

Oil prices fell close to their lowest this year on Monday as street protests against strict COVID-19 curbs in China, the world’s biggest crude importer, stoked concern over the outlook for fuel demand, Reuters reported. Brent crude dropped by $2.71, or 3.2%, to trade at $80.92 a barrel, having slumped more than 3% to $80.61 earlier in the session, its lowest since 4 January.

While the dovish minutes from the Federal Reserve’s November policy meeting have meant easing of concerns on steep rate hikes, the positives continue to accrue from falling crude prices and also regular buying by foreign portfolio investors (FPI), analysts said. US bond yields and dollar index, too, have significantly softened helping positive fund flows and are aiding positive momentum in equity markets now.

Pankaj Pandey, head, research, ICICIdirect, said that Nifty at life-time high was a function of multiple factors such as resilient corporate earnings in Q2FY23, robust GST numbers--at six-month high in October--and retail inflation slowing to a three-month low to 6.77% last month, led by softening food and commodity prices.

Globally, the US has also found comfort in its recently released lower than expected inflation readings with growing expectations of a decline in pace of interest rate hikes by Fed, amid already existing growth concerns, added Pandey.

Experts feel that with a 20% decline in crude prices in the last fortnight, further relief is likely in inflation going ahead. Reduced cost pressures are likely to aid earnings growth of corporate India, too.

“There are two positives which can impart resilience to the ongoing rally in the market: One, the steady decline in crude which has taken Brent crude to below $82. Two, the steady FPI buying (about 32000 crores so far in November) particularly in fundamentally strong segments like financials, IT, autos and capital goods" said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Asian stocks, however, weakened on Monday with growing concerns around the protests in major Chinese cities against the country’s strict zero-COVID policy. Any disruption in the world’s second-largest economy remains a concern for global economy too. China’s growth concerns, nevertheless, are putting downward pressure on oil prices. Brent futures at $80-81 a barrel were down more than 3% on Monday.

Caution, however also prevails with markets at record highs.

Srikanth Subramanian, CEO, Kotak Cherry, said, “Indian markets are defying global weakness and touching all-time high, which is on back of renewed interest from FIIs as Indian decoupling story continues to play out. However, one must also realize that as we continue to see better growth rates than world, our valuations too are priced at those premiums."

Subramanian said even long-term investors at this point should not betray discipline. One should ideally avoid any extreme movements and stick to the core asset allocation that one has defined for oneself, he said.

Going ahead, all eyes will be on the US jobs data next week and Fed Chair Jerome Powell’s speech on Wednesday. Any hawkish statements from Powel will be negative since markets have factored in slower rate hikes taking the terminal rate around 5%, said experts.

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