The Indian market extended its upward movement for the third consecutive session on May 30, returning to the highest level since May 5, following upmove in the global markets and correction in the US dollar index. Buying in attractively-valued stocks after a severe correction in the last few weeks also supported the market.
The BSE Sensex surged 1,041 points or 1.9 percent to 55,926, taking the total three-day gains to more than 2,100 points, while the Nifty50 spiked 309 points or 1.9 percent to 16,661.4 at close.
The broader markets also participated in the run-up, with the BSE Midcap and Smallcap indices rising more than 2 percent each, as breadth remained in favour of bulls. More than two shares advanced for every declining share on the BSE.
Every beaten down sector saw investors moving in. The BSE IT index, which corrected more than 10 percent in April as well as May, gained nearly 4 percent, while the Realty and Consumer Durables indices climbed around 4 percent each.
“The market is set for a near-term rally. The sharp upswing in the Nasdaq and S&P 500 late last week indicates a near-term trend reversal. The decline in the dollar index and the US 10-year bond yields, too, are positives for risk, particularly in emerging markets,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
He feels the beaten down IT segment is likely to stage a good comeback assisted by short-covering. Financials, particularly the leading banks, have more room to go up assisted by delivery-based investment buying, the market expert said.
The rally has taken investors’ wealth up by Rs 10 lakh crore in three consecutive sessions as the BSE market capitalisation increased to Rs 258.48 lakh crore, up from Rs 248.27 lakh crore on May 25.
On the global front, Asian counterparts ? Japan’s Nikkei and Hong Kong’s Hang Seng jumped more than 2 percent each, while Australia’s ASX 200 and South Korea’s Kospi jumped more than 1 percent, ahead of major economic data announcements, including PMI later in the current week.
European markets like Germany’s DAX and France’s CAC traded around eight-tenths of a percent up each following positive global sentiment and fall in dollar index.
The US dollar index, which measures the value of the US dollar against a basket of the world’s leading six currencies, traded at 101.43 levels at the time of writing this article, down from 104.85 levels on May 12 this year.
However, experts are still doubtful over the sustainability of the current recovery as oil prices, one of the major causes of rising inflation risk, still stayed above $100 a barrel. Hence, they termed the current rally a relief rally, which could sustain only if the price of oil falls and sustains below $100 a barrel.
International benchmark Brent crude futures traded at $120 a barrel at the time of writing this article, which is a major risk for oil-importing countries including India.
Hence, the policy tightening by central banks remain at the fore to tame this elevated inflation. All eyes are on the upcoming Monetary Policy Committee (MPC) meeting scheduled to be held in June.
CPI inflation in India rose to 7.79 percent in April, the highest since May 2014, up by 84 bps from 6.95 percent in March, while WPI inflation rose further to 15.08 percent in April, up from 14.55 percent in March.As this is a broadbased rally, about 385 stocks hit the upper circuit on Monday, (against 256 stocks hitting the lower circuit), which did not include any ‘A’ group stock.