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The benchmark indices ended higher on Friday in line with global cues.
Asian stocks rose as fears of an impending US recession receded and the mildly positive inflation data from China boosted the sentiments.
The Sensex rose 819 points or 1.04 per cent to settle at 79,705, while the Nifty surged 1.04 per cent to 24,367. The volatility index, Nifty VIX, fell by 7.5 per cent, settling at 15.37, indicating a drop in market volatility. Nifty fell 1.42 per cent over the week to post its second straight week of losses.
The market witnessed broad-based buying across sectors on Friday, with the realty sector seeing a relief rally due to the reinstatement of indexation benefits. Foreign portfolio investors (FPIs) bought shares worth ₹407 crore on Friday, according to exchange data.
Earlier this week, a major sell-off across the globe was sparked by a rise in probability of a quicker rate hike by the Bank of Japan on account of sharp increase in inflation. However, reassurance by the BoJ that the central bank would not raise interest rates during periods of financial instability calmed market nerves.
“While the carry trade issue appears to have been eased for now, a gradual increase in interest rates by the BoJ could have some impact in the near future. Although FPIs have been net sellers for the last month, strong inflows from DIIs and retail participants have absorbed the selling pressure from FPIs,” said Vinod Nair, Head of Research, Geojit Financial Services.
Word of caution
On Thursday, the RBI kept its policy rate unchanged but the overall tone was slightly hawkish, including an expectation of upward revision in CPI, which hints at caution.
According to Nair, domestic valuations are not cheap while Q1 results are painting a moderation in growth. So far, 46 companies in the Nifty 50 index have reported a PAT growth of 6.12 per cent YoY, marginally better than the expectation of 5.78 per cent.
“Going forward, the direction of the domestic market will be influenced by global markets. A lack of fresh triggers and subdued earnings will be a deterrent for higher valuation, investors are advised to shift their focus from growth stocks to value stocks,” Nair said.
Markets in Japan, Taiwan, South Korea and Hong Kong ended higher while Shanghai settled lower on Friday. European markets were trading in the green. The US markets had ended higher on Thursday.
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