The Indian equity benchmarks staged strong bounce back on Friday after witnessing one of their worst sessions of the year on the previous day. The Sensex rose as much as 1,604 points or 3 per cent and Nifty 50 index reclaimed its important psychological level of 16,250 after closing at 15,809 in the previous session. The surge in Friday's session came on the back of broad-based buying interest led by heavyweights like Reliance Industries, Infosys, HDFC twins, ICICI Bank and Hindustan Unilever.
Reason Behind The Friday's Surge
Indian markets mirrored gains in Asian peers after China, in a surprise move, cut key interest rates to spur the sluggish growth which has been hit hard by the lockdowns imposed to curb the spread of Covid-19.
China cut its five-year loan prime rate (LPR) by 15 basis points on Friday morning, a sharper cut than had been expected, as authorities seek to cushion an economic slowdown, though it left the one-year LPR unchanged. The five-year rate influences the pricing of mortgages, news agency Reuters reported.
MSCI's broadest index of Asia-Pacific shares outside Japan quickly built on early gains after the cut, and was last up 1.4 per cent.
Chinese blue-chips were 1.1 per cent higher in early trade and Hong Kong's Hang Seng index jumped more than 2 per cent, while Australian shares rose 1.3 per cent. In Tokyo, the Nikkei stock index gained 1 per cent.
Back home, analysts said that sharp selloff in the previous session was due to US markets going into bearish phase and added pressure came on the back of weekly expiry of index futures and option contracts which took benchmarks into oversold zone and Friday's bounce was also because of short covering rally, when traders convert their short positions by going long.
Has The Tide Turned
Market participants advice traders that they should buy the dip as Nifty is likely to trade in range of 15,800-16,300 and it is expected to move up going ahead.
"Investors are advised to buy the dips and maintain their positions after a bout of volatility in the markets. After yesterday's expiry the markets have rebounded from lower levels. If Nifty sustains above 15,900-16,000 levels then by next week we can see a bounce back towards 16,400-16,700," Sumeet Bagadia, associate director at Choice Broking told Outlook Business.
Among the top picks he advises buying Tata Motors for an upside of 5-8 per cent.
Markets are looking good from a near term perspective as inflation has peaked out and the worst may be over, said Sanjiv Bhasin, director at IIFL Securities told Outlook Business.
"Market is looking good as inflation has peaked out whatever the Fed had to do has already been done after being extremely hawkish. In India domestic consumption and demographics are good and we saw results were much better than expected. However, the problem was in terms of margins which will improve once inflation gets under control and crude prices fall which I am expecting that next week onwards we can see some a selloff in commodities," Bhasin told Outlook Business.
In Friday's session buying was visible across sectors as all the 15 sector gauges compiled by the National Stock Exchange were trading higher led by the Nifty Pharma index's 3 per cent gain. Nifty Healthcare, PSU Bank, Realty, Metal, Media, FMCG, Auto and Bank indices also rose between 2-3 per cent.
Dr Reddy's Labs was top Nifty gainer, the stock rose 7 per cent to Rs 4,204 after its reported March quarter earnings. The Hyderabad-based company on Thursday said its consolidated profit after tax (PAT) for the quarter ended March 31 was down by 76 per cent to Rs 87.5 crore against Rs 362.4 crore in the same quarter a year ago. The profit was hurt by one-time impairment charge, the company said.
Nestle India, JSW Steel, Tata Motors, Cipla, Adani Ports, Hindustan Unilever, HDFC Life, Sun Pharma, Britannia and Reliance Industries also rose between 3-5 per cent.
On the flipside, UPL, Shree Cements and Power Grid were among the notable losers.
The overall market breadth was extremely positive as 2,425 shares were advancing while 761 were declining on the BSE.