Indices see best weekly gains in over a month; IT, pvt bank stocks lead

The benchmark indices edged higher for the second day in a row on Friday to eke out their best weekly gain since the end of July.

During the day’s trade, the Sensex went past 60,000, while the Nifty50 moved close to the 18,000-mark. Both indices, however, ended the day off their intraday highs, with the Sensex finishing at 59,793, up 105 points or 0.18 per cent, while the Nifty50 at 17,833, up 35 points or 0.2 per cent. Both indices rose 1.7 per cent during the week, their biggest weekly advance since July 31.

Gains in beaten-down IT stocks were the highlight of Friday’s trade. The Nifty IT index rose 2.2 per cent, with Infosys jumping 2.4 per cent and Tata Consultancy Services moving 1.5 per cent up.

“We believe that though the India IT sector may face some near-term pressure on recessionary concerns, it offers a decent valuation after the 28 per cent correction from its peak in January 2022, with its strong medium-to-long-term growth potential,” wrote Kunal Vora, head of India Equity Research, BNP Paribas in a note.

Private banks, too, continued with their outperformance. The Nifty Private Bank index rose 0.6 per cent on Friday and 2.5 per cent for the week. “While our view on the market is cautious, we see some sectors and stocks offering comfort on both valuation and growth. We remain overweight on the banking sector, given it is trading below its 10-year mean next 12-month price-to-earnings, with improving credit growth coupled with stronger and cleaner balance sheets,” Vora said.

Over the past three months, the Indian market has outperformed most global peers. The outperformance has led to the widening of India’s valuation premia with other emerging markets. Also, on a standalone basis, the Nifty50 trades at nearly 22 times its estimated earnings for FY23.

India’s strong outperformance “probably reflects investors’ belief that the Indian economy is in a relatively stronger position versus other economies. This may be true for growth but not so for other macroeconomic parameters (BoP, fiscal, and inflation). Also, India’s post-Covid-19 economic recovery has been sub-par, so far. We see recovery in household and private capex (product-linked incentive scheme will start in earnest from the 2025 financial year or FY2025) but our earlier excitement has subsided a little, given global slowdown and domestic inflation issues,” said Kotak Institutional Equities strategists, led by Sanjeev Prasad, in a note earlier this week.

Most global markets edged higher on Friday amid a retreat in the US dollar after the euro rallied on the European Central Bank’s decision to lift interest rates by 75 basis points (bps) on Thursday. Experts said investors are gauging whether monetary tightening by global central banks has already been factored in by the market.

“Global indices edged higher as investors reassessed the outlook for monetary policy following ultra-hawkish remarks from the Fed chair and 75 bps rate hikes by the ECB. While the energy crisis in Europe continued to haunt investors, Chinese policymakers’ renewed efforts to strengthen its economy boded well for the Chinese bourses. In an effort to stabilise declining oil prices, Opec+ opted to cut back on the output given the faltering global growth outlook,” said Vinod Nair, head of research, Geojit Financial Services.

The market breadth was mixed on Friday with 1,658 stocks advancing and 1,798 declining. The market cap of all BSE-listed companies hovered around record highs of Rs 283 trillion.

Rs gains; yields rise, too

The rupee appreciated 13 paise to close at 79.58 against the US dollar on Friday, tracking positive domestic equities and foreign fund inflows. The dollar index, which measures the greenback’s strength against a basket of six currencies, fell 0.98 per cent to 108.63.

According to Anuj Choudhary, research analyst at Sharekhan by BNP Paribas, “Global inflationary pressures may also put pressure on riskier assets. However, weakness in the dollar and positive cues from global markets may support the rupee at lower levels.”

“USD-INR spot price is expected to trade in a range of 79 to 80.30 in the next couple of sessions,” Choudhary added.

Indian government bond yields traded marginally higher on Friday after a sharp fall in the previous session, as traders shifted focus to debt supply at a weekly auction.

The benchmark 10-year government bond yield was at 7.167 per cent, up 3 basis points, at the close. The yield fell 5 basis points to 7.1353% on Thursday.

“Bullish bias is still intact for bonds, but traders will wait to gauge the cut-offs at the auction today, before adding more positions,” a trader with a state-run bank said.

Oil sees weekly slide

Oil, too, rose, supported by real and threatened cuts to supply, although crude was set for a second weekly decline as aggressive interest rate hikes and China’s Covid-19 curbs weighed on the demand outlook.

Brent crude rose $2.29 or 2.6 per cent, to $91.44 a barrel by 7:00 pm IST. US West Texas Intermediate (WTI) crude climbed $2.45, or 2.9 per cent, to $85.99.

“Over the coming months, the West will have to contend with the risk of losing Russian energy supplies and oil prices soaring,” said Stephen Brennock of oil broker PVM.

Brent is down sharply from a surge in March close to its all-time high of $147 after Russia invaded Ukraine, pressured by worries about a recession and demand.

Despite Friday’s bounce, both crude benchmarks were headed for a weekly drop, with Brent down almost 2% on the week after at one point hitting its lowest since January.

With inputs from PTI & Reuters