Mumbai, Oct 5: Indian equity markets staged a recovery on Monday after a prolonged period of losses, with banking and information technology shares leading the rebound as investors responded to softer crude oil prices and reduced expectations of aggressive interest-rate increases by the US Federal Reserve.
The Sensex and Nifty opened higher after India’s benchmark indices had suffered eight consecutive weekly declines, their longest losing streak in 25 years. The previous stretch of weakness had been driven by a combination of foreign investor selling, rising bond yields, expensive crude and uncertainty surrounding global monetary policy.
The Sensex climbed 0.62 per cent to 72,359.72, while the Nifty 50 advanced 0.56 per cent to 22,545.25. Thirteen of the 16 major sectoral indices gained during the early trading session, reflecting a broad improvement in market sentiment rather than a rally confined to a handful of companies.
Financial stocks were among the strongest performers. HDFC Bank gained around 1 per cent after the lender appointed Anup Bagchi as its new chief executive officer. Punjab National Bank also advanced after reporting a 14.8 per cent increase in global advances, while Bank of Baroda rose following an 18 per cent increase in quarterly advances.
Bajaj Finance was another notable performer, gaining 4.3 per cent after reporting an 11 per cent year-on-year increase in new loans. The performance of major lenders provided investors with evidence that credit demand remains resilient despite the challenging market environment.
Information technology stocks also attracted buying interest. The sector gained around 1.1 per cent as investors took encouragement from strong revenue and bookings reported by Accenture. The developments raised expectations that demand for technology services could remain relatively resilient despite uncertainty surrounding global economic growth.
The recovery comes at an important stage for the Indian market because investors are entering the corporate earnings season. Quarterly results are expected to provide fresh clues about how companies are coping with higher input costs, currency movements, interest rates and uncertain international demand.
Tata Consultancy Services is among the companies drawing particular attention, with its second-quarter results expected to be an important event for the information technology sector. Investors are likely to examine new deal wins, revenue growth, margins and management commentary on overseas demand.
The market is also preparing for the outcome of the RBI’s October monetary policy meeting. The central bank’s three-day Monetary Policy Committee meeting began on October 5 and will conclude with the policy decision on October 7.
Economists are increasingly divided over the likely course of monetary policy, although a Reuters poll showed that nearly 60 per cent expect a 25-basis-point increase in the repo rate. A potential hike would take the benchmark rate from 5.25 per cent to 5.50 per cent and could mark the beginning of a new tightening cycle.
The policy decision has become more significant because inflation has moved higher while economic growth remains robust. Consumer inflation reached 4.82 per cent in August, above the RBI’s 4 per cent target, while GDP growth stood at 7.8 per cent in the second quarter.
Higher crude prices remain another major concern for investors. Oil prices have stayed above $100 a barrel during the Middle East conflict, creating risks for India’s import bill and corporate costs. However, oil prices eased on October 5 after increased Middle Eastern exports and a coordinated release of 100 million barrels from emergency reserves by G7 nations helped ease immediate supply concerns.
Saudi Arabia also announced a reduction in its November crude selling price for Asian buyers. The move could be beneficial for Indian refiners and reduce some of the pressure created by expensive energy imports. Nevertheless, market participants remain cautious because geopolitical developments could quickly reverse the improvement in oil supply conditions.
Another factor supporting Monday’s market mood was a change in expectations regarding US monetary policy. Weaker-than-expected American jobs data reduced concerns that the Federal Reserve would pursue an aggressive rate-hiking path. Lower expectations for US rates can improve sentiment towards emerging-market assets by reducing pressure on capital flows and borrowing costs.
For Indian equities, this global development is particularly important because foreign institutional investors have remained cautious. Prolonged selling by overseas investors has been one of the major factors behind the market’s recent weakness.
Monday’s rebound therefore does not necessarily signal the end of the broader correction. Analysts continue to watch crude prices, bond yields, foreign fund flows and the RBI’s policy stance before concluding that the market has entered a sustained recovery.
The Nifty 50 remains below levels seen earlier in the year, while investors are likely to remain selective as corporate earnings arrive. Companies with strong balance sheets, stable cash flows and resilient demand could continue to attract interest, while highly leveraged businesses may face greater scrutiny if borrowing costs rise.
The debut of new companies in the equity market is also adding to the activity. AceVector was scheduled to list on the BSE and NSE on October 5, while several other mainboard and small and medium enterprise listings were also lined up. Market participants were monitoring these debuts for indications of investor appetite for new offerings after the recent volatility.
With the RBI decision, corporate earnings, oil prices and global interest-rate expectations all converging, the coming sessions are likely to remain highly sensitive to new economic data.
Monday’s gains offered investors some relief after the market’s unusually long losing streak. Whether the rebound develops into a sustained recovery, however, will depend on whether inflation moderates, energy markets stabilise and corporate earnings justify current valuations.