The market seems to be on a recovery phase as it has gained little more than 9 percent from its fresh 52-week low. While 40 stocks have given returns of 20-50 percent during this period, 90 percent stocks in BSE 500 are trading in the green.
The Nifty50 has moved from a low of 15,191 on June 17 to 16,600 levels on Thursday, which is a 1,400-point rally in absolute terms. In case of BSE Sensex, the gains stood at 4,600 points from 50,900 to 55,600 levels.
The BSE Midcap and Smallcap indices also joined the bull run and posted around 14 percent gains each in this period.
A recovery trend in international markets have helped boost the investor sentiment, while a stability in oil prices, positive economic indicators, slowdown in FII selling and resumption of buying, consistent buying by DIIs, corporate earnings and a downward move in inflation have supported the rally in the equity market.
Every sector participated in the run with auto, bank, capital goods, consumer durables, FMCG, industrials, power and realty being the double-digit gainers in more than a month, rising 10-16 percent.
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Some of the key factors at play are sustained and strong domestic flows absorbing the FII selling since October 2021, and cleansing and deleveraging of banking and corporate balance sheets over the last five years, Rakesh Parekh, Managing Director of Portfolio Management Services at JM Financial Services said.
He further said that barring external risks like oil price pressures, Indian macro indicators have been quite strong - Resilient high frequency growth indicators like PMIs, tax collections, contained CPI (relative to global trends), in line Debt/GDP at around 90 percent, strong buffer of forex reserves.
Around 90 percent stocks in BSE500 index traded in green now, of which top 40-odd stocks gained 20-50 percent in more than one month, including ITI, Adani Transmission, Tube Investments of India, and Sobha, which provided stellar gains of 40-50 percent.
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In addition, stocks like Ceat, Anupam Rasayan India, Adani Total Gas, KRBL, SBI Card, Aster DM Healthcare, Granules India, Gujarat Fluorochemicals, Jubilant Ingrevia, Bajaj Electricals, Minda Corporation and Responsive Industries rallied 25-33 percent in the same period.
Blue Dart Express, Asahi India Glass, Can Fin Homes, Hindustan Unilever, KEC International, Crompton Greaves Consumer Electricals, Bosch, City Union Bank, Mahindra CIE Automotive, Jamna Auto Industries, Linde India, Amber Enterprises India, Adani Green Energy, Chemplast Sanmar, SKF India, Canara Bank, Apollo Tyres, Godrej Consumer Products, LIC Housing Finance, Federal Bank, Indian Bank, IDFC, Vardhman Textiles, and Dalmia Bharat added more than 20 percent return in more than one month, which is much better than indices gains.
After around Rs 3.8 lakh crore worth of shares selling since October 2021, FIIs seem to be finding stocks in India attractive enough as they have made buying in five sessions in July and in the last three sessions, they have been net buyers, which is quite supportive for the market.
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They have bought around Rs 4,500 crore worth of shares in July, which resulted into a cut down in net selling to around Rs 7,500 crore from more than Rs 10,000 crore during the month.
On the other side, DIIs have compensated the FII outflow by buying nearly Rs 8,000 crore worth shares in July, though intermittently they have booked profits by utilising market rally.
"In the domestic market, the biggest positive is FIIs turning buyers. Even if they turn sellers at higher levels, the intensity of selling will be much lower than in the last several months," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
The volatility also calmed down with the easing of concerns and rally in global counterparts. India VIX, which gauges the expected market volatility, fell to around 17 levels, from 28 levels in more than one month.
Now the next key thing to watch out for would meetings of central banks including European Central Bank and Federal Open Market Committee. Most of experts feel ECB is expected to announce first rate hike in the last 11 years to fight inflation, while what is the quantum of rate hike by Federal Reserve will be closely watch by the street now.
"The Fed is likely to raise the rate by 75 bps and ECB, perhaps, by 50 bps. But more important than the rate hikes, their commentary on the trajectory of inflation and economic growth would be closely watched," Vijayakumar said.
If there are indications that inflation has peaked and is likely to trend down, markets would respond positively. If not, the market response would be negative, he added.
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