Indian benchmark indices have so far in 2023 benefited from a number of favourable factors, including a sharp fall in the crude oil prices, resumed foreign portfolio investor (FPI) buying, stable Q4FY23 earnings, and a potential halt by the US Fed in raising interest rates.
The Nifty 50 hit its 2023 high on Thursday, May 4 and gained 165.95 points to touch 18,255.80. With the exception of May 3, when it finished lower by 0.32%, the benchmark indices have been moving upward for last seven trading sessions since April 24.
The benchmark indices saw their biggest monthly gain in 2023 in April, which showed a significant improvement in performance. The real estate, banking, and auto sectors all experienced significant rallies at this time, and there was also a steady inflow of FPIs and a drop in the price of crude oil. Only 3 equities in the Nifty 50 index reported losses in April, while 46 stocks showed gains.
The lower valuation of Nifty 50 (16.6X CY2024 P/E) coupled with the easing inflation rate and peaking of the interest rate cycle along with a decline in commodity prices bodes well for the Indian market. This scenario could be a direct boost to core sectors of the economy, especially infrastructure, capital goods, energy, construction, etc, believes Vinit Bolinjkar, Head of Research, Ventura Securities.
The Nifty 50 index has factored in these positive sentiments and has shown impressive performance throughout 2023. This positive trend could continue throughout the year, further bolstering the market’s growth and development.
FPIs continued to buy Indian shares in May and invested ₹10,850 crore in the past four trading sessions.
According to data available with the depositories, this followed a net investment of ₹11,630 crore in stocks in April and ₹7,936 crore in March.
Due to sluggish demand, as indicated by the Energy Information Administration (EIA), crude oil prices fell last week. The price of Brent oil futures on the Intercontinental Exchange (ICE) dropped 6.5% to $75.1 a barrel as the week came to a close. The May contract for MCX crude oil also decreased 7.1% for the week, closing at $5,841 a barrel on Friday.
According to Avinash Gorakshakar, Head-Research, Profitmart Securities, sectors like banking which have a high weightage in the Nifty are the key reasons for out performance in the index. Banking stocks continue to be are attractive and are being accumulated by funds FIIs which are also witnessing healthy flows in the market.
More importantly, dollar index is expected to correct sharply, which could increase overseas fund flows ahead. But in an index level now the market will consolidate as the rise in index has been very fast in a short time frame. So focus will be on mid and small caps where valuation comfort is good.
Eight Nifty stocks rally over 10% so far in 2023
Investors have received good returns from Nifty 50 stocks during this period (until Friday, May 5).
