Nifty, Sensex continue rally for second week despite FII outflows
The Indian equity market has been on a roll, with the benchmark indices Nifty and Sensex continuing their rally for the second consecutive week. Despite foreign institutional investors (FIIs) pulling out funds from the Indian market, the indices managed to eke out marginal gains, courtesy of stronger second-quarter earnings, easing inflation, and optimism surrounding the India-US trade negotiations.
The Nifty index edged higher by 0.68% to close at 26,068, while the Sensex gained 0.50% to end the week at 85,231. The rally was broad-based, with most sectoral indices participating in the upmove. The Nifty Bank index, which had been underperforming in recent weeks, finally caught up with the broader market, gaining over 1% during the week.
The earnings season has been a key driver of the market’s performance, with most companies reporting better-than-expected numbers. The Q2 earnings have been robust, with many companies beating street estimates. This has led to an improvement in investor sentiment, with many market participants believing that the earnings growth will continue in the coming quarters.
Inflation, which had been a major concern for the market, has also shown signs of easing. The consumer price index (CPI) inflation, which had been hovering above the 4% mark, has finally started to cool off. The October CPI inflation came in at 3.8%, lower than the 4.2% recorded in the previous month. This has led to hopes that the Reserve Bank of India (RBI) may consider cutting interest rates in its upcoming monetary policy review.
The India-US trade negotiations have also been a major factor driving the market’s performance. The two countries have been engaging in talks to resolve their trade differences, and there are hopes that a deal may be announced soon. This has led to optimism among investors, with many believing that a resolution to the trade tensions will boost economic growth and lead to a pickup in corporate earnings.
Despite the positive factors driving the market, there are still concerns about the FII outflows. Foreign investors have been pulling out funds from the Indian market, citing concerns about the economic slowdown and the impact of the US-China trade war. However, domestic institutional investors (DIIs) have been absorbing the FII outflows, providing a cushion to the market.
The DIIs have been net buyers in the market, investing over Rs 10,000 crore in the past week. This has helped to offset the FII outflows and has provided support to the market. The DIIs have been investing in a variety of sectors, including banking, IT, and pharmaceuticals.
The market’s technical indicators are also looking positive. The Nifty index has been trading above its 200-day moving average, which is a bullish sign. The relative strength index (RSI) is also in the neutral zone, indicating that the market is not overbought or oversold.
In terms of sectoral performance, the banking sector has been a major outperformer. The Nifty Bank index has gained over 1% during the week, driven by strong earnings from public sector banks. The IT sector has also been performing well, driven by a pickup in demand from the US and European markets.
The pharmaceutical sector has been another major outperformer, driven by a recovery in earnings from major pharmaceutical companies. The sector has been facing challenges in recent times, including regulatory issues and pricing pressures. However, the Q2 earnings have been robust, with many companies beating street estimates.
In conclusion, the Indian equity market has continued to rally for the second consecutive week, driven by stronger Q2 earnings, easing inflation, and optimism surrounding the India-US trade negotiations. Despite FII outflows, the market has been supported by DIIs, who have been absorbing the outflows and providing a cushion to the market. The technical indicators are also looking positive, with the Nifty index trading above its 200-day moving average. With the earnings season still ongoing, investors will be closely watching the Q2 numbers from major companies. Any positive surprises could lead to a further rally in the market.
News Source: https://investmentguruindia.com/newsdetail/nifty-sensex-continue-rally-for-second-week-despite-fii-outflows703298
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