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Markets gain for a sixth consecutive day, longest streak since October

The benchmark indices on Friday gained for a sixth consecutive day, matching their longest winning streak since October last year.

Resurgence in foreign inflows amid optimism that inflation has peaked and the hope that central banks may not go for aggressive monetary tightening from now on have helped boost the appetite for risky assets.

The Sensex on Friday rose 390 points, or 0.7 per cent, to end at 56,072. The Nifty ended the session at 16,719, a gain of 114 points or 0.7 per cent. Both indices rose over 4 per cent during the week, the highest in nine months. Net inflows by foreign portfolio investors (FPIs) turned positive in July for the first time since September.

According to NSDL, FPIs invested Rs 1,100 crore in domestic stocks this month. It remains to be seen if positive foreign flows sustain over a longer period even as central banks continue to tighten their monetary policy.

On Friday, FPIs sold Rs 676 crore net.

Analysts said investors were hoping inflation had peaked after commodity prices, including crude oil, fell in the past few weeks. And interest rate increases may not be as aggressive if the fall persists. On Friday, Brent crude was trading at $102.6 a barrel. Over the past five weeks, it has corrected 16 per cent, prompting the government to cut imposed windfall taxes on fuels and eliminate the levy on gasoline exports.

The rally in banking and finance stocks after some banks posted good quarterly results also helped sentiment.

“Investor optimism is due to a combination of a fall in commodity prices and the good monsoon. The resumption of gas supplies by Russia through the Nord Stream pipeline also gave some relief to investors. And both the events happened when the valuations moderated due to the battering of stocks recently,” said G Chokkalingam, founder, Equinomics.

Concern about economic growth and its impact on corporate profitability could keep gains in check, said analysts.

Chokkalingam, however, said: “The gains will not be stable and steady for the next few months. The balance sheet shrinking by the Federal Reserve will be more aggressive in the coming months. And emerging market currencies might weaken further. Even FPI buying in the last few sessions is unlikely to sustain.”

Interest-rate hikes by central banks, the unwinding of an easy monetary regime, disruptions in global supply chains, and fears of recession have heightened market volatility since the beginning of the year. China’s zero Covid policy, war in Ukraine, and its impact on commodity prices have made things worse for the global economy and equities.

Investor risk appetite has plummeted to the levels last seen during the global financial crisis, and allocation to defensive stocks is the highest since the initial months of the pandemic, a BoFA survey of fund managers has found.

The market breadth was strong, with 1,744 stocks advancing and 1,583 declining on the BSE. Close to two-thirds of the Sensex constituents ended the session with gains. HDFC Bank rose 2.3 per cent and was the best-performing of them. Banking stocks gained the most, and its sectoral index on BSE gained 1.5 per cent.

“The markets will first react to the results of heavyweights in early trades on Monday. Besides, the development on the global front over the weekend will remain in view. We recommend continuing with a positive yet cautious stance and focusing more on identifying stocks amid rotational buying,” said Ajit Mishra, vice-president, research, Religare Broking.

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