Domestic stocks closed over 1% higher on Thursday, their biggest single-day gain in nearly two months, supported by a global rally in equities.

The BSE Sensex rose 638.70 points, or 1.22%, to 52,837.21, while the Nifty gained 1.23% to close at 15,824.05.

Shares in other Asia-Pacific markets were mostly higher as well, with Hong Kong’s Hang Seng index rising 1.83% and South Korea’s Kospi 1.07%.

According to Milind Muchhala, executive director at global investment bank Julius Baer, global market cues and a decent start to the earnings season cheered investors.

“Markets are clearly rewarding stocks or sectors where the earnings momentum is strong or where growth visibility remains good. Moreover, with the flurry of initial public offers, which are seeing a healthy response from investors, the related sectors are seeing interest due to benchmark valuations. However, it becomes critical to keep an eye on valuations, as some of the stocks have seen a very sharp re-rating. Key monitorables in the near term are the gross margin pressure due to high input costs/commodity prices and recovery in retail demand,” he said. The India Volatility, or the so-called fear gauge, fell 10%, indicating that investors do not expect any further corrections.

“The domestic market shrugged off concerns over the spread of Covid-19 and FII (foreign institutional investor) selling. Global markets continued to hold on to gains owing to solid earnings reports and turned their focus to the ongoing European Central Bank’s policy announcement. A confirmation by the US Fed to continue its supportive policy in the upcoming meet despite rising inflationary pressure will be a key factor in maintaining the direction of the rally,” said Vinod Nair, head of research at Geojit Financial Services.

Foreign investors worried about a possible third Covid wave have been net sellers of Indian shares worth $1.18 billion in July so far, after pumping in $2.25 billion in the previous two months.

Global equities came under pressure recently amid concerns that the pace of economic recovery may get impacted due to a further spread of the pandemic.

Foreign investors have been sellers in emerging markets over the past few weeks, and India, too, saw outflows, albeit a modest $500 million in July so far. Hawkish comments from the US Fed strengthened the dollar, and the Indian rupee weakened against most of the major currencies as well, Credit Suisse Wealth Management India said in a report.

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