Indian stock markets on Monday saw initial losses which was later corrected after investors bought into bluechip stocks with the broader BSE index closing the day up 0.4%.
Tracking mixed trends in global markets, Indian equity markets opened weak and traded flat for most part of the session after US Federal Reserve chairman Jannet Yellen said the environment was conducive for higher interest rates. Buying in auto, select banks and infrastructure stocks in the last hour pulled up markets.
The BSE Sensex closed up 120 points or 0.4% at 27,902.66 and the NSE Nifty50 index was up 35 points or 0.4% at 8,607.45.
Tata Motors was the biggest gainer, closing up over 4%, despite a drop in quarterly profit, as several brokerages raised their target price on the stock, on expectations of continued strong sales growth at Jaguar Land Rover.
Other gainers included Reliance Industries and Hero MotoCorp, which ended up over 2.8%. ICICI Bank, Larsen & Toubro, Adani Ports and Bajaj Auto rose 1.5-2.1%.
“Markets ended with marginal gains thanks to late hour recovery in select index majors Initially sentiments were downbeat in line with other global markets, post US Fed chairperson Yellen’s speech indicating possibility of interest rate hike in during the current calendar year,” said Jayant Manglik, president retail distribution at Religare Securities.
Deepak Parekh, chairman of India’s largest mortgage lender HDFC sounded concerned over the Fed’s commentary and said any interest rate hikes in the US could result in FII flows out of India, and pressure the Rupee.
“In January and February, India saw an outflow of about $3-4 billion and the rupee came under pressure...Any hint of raising interest rates in the US will result in massive capital outflows, once again resulting in unprecedented swings in currencies and stocks,” Parekh said in his address at a CII event on risks.
So far in 2016, foreign institutional investors have pumped Rs 39,602 crore in India’s equity markets.
Parekh says India should focus on attracting long-term foreign direct investment.
Meanwhile, investment bank Morgan Stanley believes India is likely emerging from its deepest earnings drawdown of the past 20 years and a pickup in earnings should drive markets ahead.
“We expect upwards earnings revisions, a factor that drives stock prices up. Our Sensex target for June 2017 offers double-digit relative US Dollar upside versus other emerging markets,” Ridham Desai, MD, Morgan Stanley, said in a report.