Indian stock markets bounced back on Tuesday, recouping all the losses from the previous day. The optimism was driven by global markets, as hopes that the Israel-Hamas conflict would remain contained to the Gaza strip caused a softening in crude prices. In addition, the Israel TA 35 Index was trading up 0.9% at 1745, further reinforcing the positive sentiment.
Dovish comments made by a senior Federal Reserve official also contributed to the market recovery. While foreign institutional investors (FIIs) were net sellers of stocks amounting to ₹1,005.49 crore, domestic institutional investors (DIIs) stepped in and purchased shares worth ₹1,963 crore.
The Nifty, India’s benchmark index, gained 0.9% to close at 19,689.85, marking its biggest increase in over a month. The Sensex, the broader index, also posted significant gains, rising 0.87% to 66,079.36. Both the Nifty Midcap 150 and the Nifty Smallcap 250 indices also increased over 1%.
Nifty Realty reached a multi-year high of 606.2. However, despite the market recovery, the volatility index Vix fell only 1.4%, suggesting that near-term risks are still present.
Adani Enterprises, Adani Ports, Hindalco, Bharati Airtel, and Coal India were among the top gainers on the Nifty, rising by 2.30-5.37%. Adani Ports, in particular, rose 3.7% after brokerage Motilal Oswal initiated coverage with a target of ₹1,010.
Crude prices also declined, with Brent crude trading down 35 cents at $89.54 a barrel. Expectations of the Israel-Hamas conflict remaining localized to Gaza eased concerns about oil supply disruptions.
At the global level, comments by Federal Reserve Vice Chair Philip Jefferson, indicating that the Fed would proceed cautiously while firming policy, boosted stock markets. The Nikkei 225 in Japan gained 2.43%, and the Hang Seng in Hong Kong rose by four-fifths of a percent.
Market experts believe that the initial negative reaction to the Israel-Hamas conflict was a knee-jerk reaction, and the subsequent rally reflects the market’s pricing in a localized conflict that would not significantly impact oil supply.
However, some caution remains. The markets are currently considered overvalued, and a correction may occur over the next six to eight months. Expectations of Q2 earnings growth moderating to 18-20% year-on-year could moderate valuations.
In summary, Indian stock markets recovered on Tuesday, following the positive trend in global markets. The decline in crude prices and dovish comments from the Federal Reserve boosted sentiment. However, concerns over overvaluation and potential corrections linger in the market.
Definitions:
– Nifty: The National Stock Exchange of India’s benchmark stock market index, representing the performance of the 50 largest and most liquid Indian stocks.
– Sensex: The Bombay Stock Exchange’s benchmark stock market index, consisting of 30 financially sound and well-established companies representing various sectors.
– FIIs: Foreign Institutional Investors, refers to organizations or individuals from outside the country investing in the financial markets of another country.
– DIIs: Domestic Institutional Investors, refers to organizations or individuals within the country investing in the financial markets.
– Vix: Volatility Index, a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.
– Brent crude: A type of sweet light crude oil that serves as a benchmark for crude oil pricing.
– Nikkei 225: The stock market index for the Tokyo Stock Exchange, representing the performance of the 225 largest publicly traded companies in Japan.
– Hang Seng: The stock market index for the Hong Kong Stock Exchange, comprising the 50 largest and most liquid companies listed on the exchange.
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