Benchmark market indices opened higher on Thursday, with the Sensex rising over 200 points and the Nifty trading close to the 24,000 mark, led by gains in banking stocks.
The BSE Sensex was at 76,814.73, up 244.38 points or 0.32 per cent, while the Nifty was at 23,971.35, gaining 56.90 points or 0.24 per cent, around 9:23 am.
Banking stocks were among the key gainers in early trade after banks mobilised a record $127 billion through the Reserve Bank of India’s concessional FCNR(B) swap facility. The broader mobilisation under the facility stood at around $136 billion, including other forex instruments.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said market sentiment was likely to improve following a slight easing in US bond yields.
“The market sentiment is likely to look up today following the slight easing of the U.S. bond yields,” Vijayakumar said.
He said the large foreign currency mobilisation could provide support to the rupee and boost investor confidence.
“A big positive from the rupee perspective is the huge mobilisation of $136 billion under concessional swap facility. The $127 billion mobilised under the FCNR(B) scheme has come way above the consensus estimates,” he said.
According to Vijayakumar, the inflows could help stabilise the rupee, which may in turn improve sentiment among foreign institutional investors (FIIs).
“The implication of this from the market perspective is that the rupee will stabilise, imparting confidence to FIIs,” he said.
He added that improving growth and earnings prospects could encourage FIIs to continue investing in Indian equities despite elevated US bond yields.
“With improving growth and earnings prospects, FIIs are likely to continue buying in India, despite the elevated U.S. bond yields,” Vijayakumar said.
The banking sector could also benefit from the large FCNR(B) mobilisation, he said, as the funds could support banks’ net interest margins (NIMs).
“Also, the huge FCNR(B) mobilisation by banks will help improve their NIMs. This is positive for banking stocks,” he said.
Vijayakumar also pointed to an unusual feature of Wednesday’s market session. The Nifty fell 141 points despite institutional investors remaining net buyers.
Institutional investors bought shares worth around Rs 9,500 crore on Wednesday, with FIIs accounting for purchases of Rs 6,688 crore and domestic institutional investors (DIIs) buying Rs 2,812 crore.
“The interesting feature of yesterday’s market decline is that the 141 point dip in Nifty happened despite a Rs 9,500 crore of institutional buying,” Vijayakumar said.
He said this indicated that much of the selling pressure came from retail investors, proprietary traders and bears who used the market weakness to sell stocks aggressively.
“So, it is obvious that the brunt of the selling came from retail investors, proprietary traders and bears who used the market weakness to hammer the stocks down. This is likely to reverse today,” he said.
The market will now track movements in the rupee, US bond yields, foreign fund flows and global cues for further direction.
