Resilience Rules The Roost
The key domestic indices reached all-time highs even though Nifty VIX, known as the ‘fear gauge’, has doubled in value over the past one month
In recent weeks, the domestic markets have been contending with substantial foreign institutional investor (FII) sell-offs and increased volatility, spurred by uncertainties surrounding the Lok Sabha election results – a crucial factor in shaping India’s future growth trajectory. Meanwhile, the markets have rebounded over the last fortnight as investor sentiment received a muchneeded boost from robust macroeconomic factors.
The Reserve Bank of India (RBI) announced its approval for the highestever surplus transfer of ₹2.11 lakh crore to the central government. Additionally, India’s forex reserves surged by USD 4.54 billion to USD 648.7 billion as of May 17, marking an all-time high, according to the latest data published by the RBI. After a period of continuous selling, FIIs demonstrated renewed positive engagement in the Indian markets, making net equity purchases totalling ₹4,671 crore in a single day. The Indian markets displayed remarkable resilience, defying the rising anxiety in the market.
The key domestic indices reached all-time highs even though Nifty VIX has doubled in value over the past one month. While BSE Sensex and Nifty 50 registered gains of 3.78 per cent and 4.09 per cent, respectively, the broader indices outperformed with gains of around 6 per cent each. The rally was broad-based, with all the sectors experiencing gains, in particular real estate, power and metal leading the surge. Industrial metals are indeed riding a wave of high prices driven by two key factors including shrinking supply and a bright long-term demand outlook.
The optimism is fuelled by the growth trajectory of the iron and steel market and the continued strength of the real estate industry. Zinc, in particular, is expected to be a star performer with its demand potentially doubling in the next decade. Power sector stocks witnessed a rally on the back of soaring demand. Peak daytime power consumption in India breached the estimated 235 GW mark, fuelled by the ongoing heat wave and persistent high temperatures.
The BSE Fast-Moving Consumer Goods index inched up a modest half a per cent, reflecting lukewarm investor sentiment. This muted performance can likely be attributed to subdued sales and lacklustre profits plaguing the FMCG sector due to rising expenses. In the past two weeks, FIIs have continued to be net sellers, while domestic institutional investors (DIIs) have remained net buyers. FIIs recorded a significant net outflow of ₹9,484 crore, contrasting with DIIs, who supported the market with a sizeable net inflow of ₹21,388 crore during the same period.
