Short-covering, coupled with positive global cues and renewed interest of foreign investors, buoyed the Indian equity markets for the third consecutive week.
Both the bellwether indices of the Indian equity markets gained over one percent each during the just-concluded weekly trade.
The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), rose 322.19 points or 1.24 percent to 26,160.90 points from its previous weekly close at 25,838.71 points.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) gained during the week under review. It ended higher by 102.15 points or 1.29 percent to 7,963.20 points.
“Markets rose for a third week in a row despite seeing some selling pressure during the week ahead of the F&O (futures and options) expiry,” Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.
“However, markets continue to consolidate in a narrow range in the absence of any major trigger on the back of thin volumes around the new year holidays.”
The bellwether indices have risen by almost five percent in the last three weeks.
Other market observers pointed-out that short-covering on account of derivatives expiry pushed up prices.
“Short-covering on account of derivatives expiry supported the upward movements in markets,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
Even the disappointing macro economic data of eight core industries (ECI) and fiscal deficit gave hope to some investors that the Reserve Bank of India (RBI) might reduce key lending rates in its upcoming policy review.
“The disappointing macro data points which were released on Thursday gave hope to some investors that RBI may ease key lending rates in its monetary policy review slated for February,” James added.
In addition, Finance Minister Arun Jaitley’s comments on his priorities for the Indian economy in 2016 boosted investors’ confidence.
The minister listed rolling out of the long-delayed GST (Goods and Services Tax) bill as his top priority for 2016.
Furthermore, he indicated that the government will work towards rationalising of direct taxes, ensuring further ease of doing business and increasing investments for social and physical infrastructure.
“The finance minister’s wishlist for the new year like GST, focus on infrastructure and lower level buying helped key benchmark indices register gains,” said Gaurav Jain, director with Hem Securities.
Besides, renewed buying interest by foreign portfolio investors (FPIs) and a strong rupee improved sentiments.
The National Securities Depository Limited (NSDL) figures showed that the FPIs were net buyers during the week ended January 1 2016. They bought Rs.467.45 crore or $70.36 million in equity and debt markets from December 28-January 1.
The data with stock exchanges showed that the FPIs bought stocks worth Rs.1,209.59 crore ($182.8 million) in the week under review.
Nevertheless, the stock exchanges data disclosed that FPIs had taken out a total of Rs.20,373.69 crore ($3 billion) during 2015.
Not just equities, even the rupee rose on a weekly basis. It strengthened by seven paise at 66.14 (January 1) to a US dollar from its previous close of 66.21 (December 23).
“Positive global market and cues thereof, appreciation of rupee against US dollar and short coverings on account of expiry of December series helped indices make gains,” Jain cited.
However, investors were seen cautious regarding the upcoming third-quarter earnings season which starts from January 14.
Additionally, sentiments were dented on account of Cadila receiving warning letters for its facilities from the US authorities.
“Cadila received warning letters for its Moraiya formulation facility and its API facility. It has becomes another one from the pharma space to face regulatory issues with US authorities and this is not a good sign for the industry,” Pankaj Sharma, head for equities with Equirus Securities, told IANS.
Moreover, lack of investors’ participation in the cash markets segment during the week under review capped gains.
Volumes in cash markets across key bellwether indices ranged from Rs.16,000 crore ($2.42 billion) to Rs.17,000 crore ($2.57 billion) throughout the week, except for the derivatives expiry session.
1. The conversion rate used in this article is 1 USD = 66.16 Rupees.
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