The Indian market have seen a dramatic 5 per cent rebound from its recent lows touched two weeks earlier. The recovery, triggered by value buying, has been supported by passing of key bills by the government and easing of fears of interest rate increase by the US Federal Reserve.
The benchmark Sensex has gained over 1,400 points from 27,457.6 (March 26 close) to 28,879.38 on Friday. This has helped reverse most of the losses seen in March, when the benchmark indices dropped nearly 5 per cent-most in over two years.
With the recent recovery, the benchmark Sensex is now just 2 per cent (less than 700 points) below its all-time closing high of 29,559.18, touched on January 29. Interestingly, the total market capitalisation of all BSE-listed company has surpassed its previous record by surpassing Rs 106 lakh crore on Friday. This is as the broader market has outperformed the benchmark indices in the last two weeks. The BSE Small Cap has rallied 13 per cent and the BSE Midcap has gained 7 per cent since March 26.
Market experts said the correction seen last month was primarily due to two key reasons. The first being fears of imminent interest rate increase in the US, which trigged a sell-off in risky assets. Secondly, subdued estimates for the March quarter corporate earnings.
Ajay Bodke, head-investment strategy & advisory, Prabhudas Lilladher said the fears of rate hike in the US have eased considerably and the market has disappointed weak fourth quarter numbers.
"The scaremongering that was happening the Fed will advance rate increase has proved to be unfounded. Now the expectations are that there will be no hike till September and it will be a one-off increase," he said.
"The negative news flow on the global front be it US rate hike, Greece or tensions in Ukraine has eased a bit. This has improved the risk appetite of the global investors," said U R Bhat, managing director, Dalton Capital Advisors.
It is not just the Indian market but most global equity markets have seen an uptick in the last two weeks. The MSCI Emerging Market index for instance has gained nearly 7 per cent since March 26.
Experts said valuations had turned attractive after the correction in March, which led to a lot of buying interests. In the past two weeks, foreign institutional investors (FIIs) bought shares worth over $500 million and domestic mutual funds too have been net buyers of around Rs 2,000 crore.
Analysts said that the passing of key legislations by the parliament, including the Insurance Bill, has boosted sentiment.
"Despite opposition the Narendra Modi government faces in the Upper House, it has been able to pass three crucial legislations. The building blocks of reforms are being laid albeit at a slower pace than what some of the enthusiast would like," said Bodke.
Analyst said that the market direction going ahead could be guided by corporate earnings, which will begin next week with Tata Consultancy Services (TCS), the country's most valuable company, announcing its numbers on Thursday.
"There isn't much expected from India Inc from the March quarter. The market has priced in subdued earnings. However, if there is a huge negative surprise, the markets could correct," said Bhat.
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