Markets at five-month high on robust buying in banking

India’s stock markets on Tuesday rallied for the second straight session and ended at a five-month high. The 30-share index Sensex rose by 477.54 points or 1.26% to close at 38,528.32. The broader Nifty50 rose by 138.25 points or 1.23% to close at 11,385.35.

Despite the mixed global cues, the benchmarks surged in the last hour of trade because of buying in the banking stocks and Reliance Industries (RIL). What drove the markets higher was the upbeat investor sentiment surrounding the positive monsoons as well as the steady foreign fund inflows.

While the midcap and smallcap stocks outperformed the benchmarks for the day, last minute buying in heavyweights like RIL narrowed the benchmark’s underperformance. The Nifty Midcap100 was up by 1.24% and Nifty Smallcap100 was up by 1.5%. Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services, said, “Nifty has been trading in a tight range for last few sessions, on the back of mixed global and domestic cues. However, the major trend is positive and a consolidation breakout could start the fresh leg of rally in the market. Volatility is gradually cooling down which suggests that bullish stance is likely to continue and we recommend a buy on decline strategy in the market.”

Positive developments around monsoon in India would help the rural economy which contributed to the market’s sentiment on Tuesday. Additionally, Nomura’s India Business Resumption Index showed upward movement in August after moderating in July. Nomura in its report said, “Nevertheless, the recovery is uneven, and the risk of reversal in momentum from a second wave of Covid-19 cases joining a ‘rolling wave’ in traditionally safer states (in the south and the east) remains high.”

Foreign portfolio investors (FPIs) also bought stocks worth $43.8 million on Monday, according to provisional data. They have till August 14 pumped in $3.5 billion in total, which is the highest monthly inflow so far this year. The futures and options segment on NSE saw a turnover which was in line with the six month average at Rs 14.9 lakh crore. The cash market saw volumes worth Rs 53,569.7 crore which was against the six month average of Rs 51,803 crore.

Globally the stock markets were trading mixed because of the rise in the Sino-US tensions with the bourses in Asia witnessing a mixed trading session. The benchmarks in Hong Kong and China were up between 0.08% to 0.39%. However, the benchmarks in Taiwan and South Korea were down by 0.65% and 2.46%. European markets in the United Kingdom, France, and Germany were up between 0.35% to 0.97% at the time of press.

The biggest on Nifty were Grasim, Ultratech Cement Company, JSW Steel, Kotak Mahindra Bank, and Zee Entertainment up by 6.5%, 3.3%, 3.12%, 3.01%, and 2.7%. The biggest losers on Nifty were BPCL, Tech Mahindra, Cipla, HCL Technologies, and GAIL. The share prices of BPCL, Tech Mahindra and Cipla fell by 1.25%, 0.91%, and 0.8%. HCL Technologies and GAIL too declined by 0.56% each.