The benchmark indices just about ended the day in the green on Tuesday. After tumbling 5% in the previous five trading sessions, the 50-share Nifty rose 32.1 points (0.22%) to close at 14,707.8, while the Sensex gained 7.09 points (0.01%) during the day’s trading session closing at 49,751.41.
The markets remained volatile and made gains on the expectations of a strong global recovery on account of rising commodity prices but their gains were capped by subdued sentiments on account of rising bond yields globally. Metal stocks rallied on account of surging commodity prices globally. The prices of metal stocks were pushed higher after the demand for metals has risen amid a supply crunch of metals. Stocks of Tata Steel and Hindalco rallied by 7.23% and 5.73% respectively.
Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services, said, “Nifty metal index advanced the most, amid a rally in commodity prices fuelled by hopes of a recovery in demand.” On the other hand, energy stocks also joined the rally on account of rising crude oil prices with Brent crude trading at $64.48 per barrel. Additionally, the announcement of the formation of a separate company for Reliance Industries’ O2C business also contributed to the buying of energy stocks. Shares of Reliance Industries rose by 0.9% on Tuesday.
The gains made by metal and energy stocks, however, were offset by the selling in the financial stocks with the Nifty Bank declining by 0.4%. While the medium-term prospects of the Indian markets continue to remain strong according to foreign financial services firms such as Nomura, the threat to the Indian equity rally in the near-term stems from the surge in Covid-19 cases, higher commodity prices adversely impacting near-term margins for companies, the rise of trade and current account deficit and potential concern of twin deficits, along with the rise in bond yields impacting equity valuations.
Nomura in its report, said, “Our base case construct assumes stronger growth over the medium term, driven by government policies and reasonably supportive monetary policy.”
Foreign portfolio investors (FPIs) sold stocks worth $119.1 million on Monday. The biggest losers on the Nifty were Kotak Mahindra Bank, Adani Ports and SEZ, Maruti Suzuki, Bajaj Auto and Divi’s Laboratories down by 3.8%, 1.75%, 1.57%, 1.5%, and 1.48%. The biggest gainers on the Nifty were Tata Steel, Tata Motors, Hindalco, ONGC, and UPL, up by 7.23%, 6.6%, 5.73%, 5.64%, and 4.84%, respectively.