Some analysts have cautioned investors, warning that selling might reappear at greater levels.
On the strength of encouraging global indications, Indian stock markets surged Thursday, extending the recent winning streak to a fourth day. The Sensex increased by more than 600 points, and the Nifty was back above 16,500. The Sensex has recovered more than 2,000 points in four sessions.
The reduction in windfall tax on oil producers and refiners, in addition to good global cues, improved the mood on Wall Street. Less than a month after enacting the two fees, the government likewise waived the export tax on gasoline.
Analysts predict that the revisions will benefit businesses like Reliance Industries, Oil and Natural Gas Corp, and Oil India Ltd. RIL stock increased by roughly 3%.
The rapid Nifty pullback from the lows of 15183 in June, according to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, is being supported by a deluge of positive news. “First, thanks to outstanding corporate earnings, the US markets have quickly recovered. Second, it appears that FPI selling has peaked. FPIs are likely to be persuaded to purchase rather than sell when the dollar index declines to 106.6 from above 108, he said.
While foreign investors have made net sales of Indian shares totaling more than $30 billion so far in 2022, they have been net buyers of Indian equities in the previous two sessions.
“The leading financials’ results are probably going to be positive. IT values now that they have corrected recently are appealing. IT would smartly recover if the US is able to avoid a recession, according to Vijayakumar.
But he did offer a word of warning. Investors should be cautious because selling could resume at greater levels.
According to Prashanth Tapse, Vice President (Research), Mehta Equities Ltd., the recent pullback has also benefited from short covering and value buying on expectations that FII selling in local equities will fade, expectations that US rate hikes will be less aggressive than expected, and a weakening US dollar.
Despite retreating from recent highs, the dollar index is still at a high level.
The decline in crude prices has also improved the mood on the local market. As a result of Western sanctions on Russia, supply concerns have bolstered oil prices, but attempts by global central banks to control inflation have put pressure on prices, fueling concerns that a future recession could reduce energy demand.
According to Nagaraj Shetti, Technical Research Analyst, HDFC Securities, Nifty faces some resistance around 16,600 while immediate support is placed at 16200 levels.
