Indian markets rose more than 1 percent on Tuesday, led by gains in the Reliance Industries Index (RIL) and major IT firms Infosys and Tata Consulting Services (TCS), amid favorable global indicators. The gains came despite US Federal Reserve Chairman Jerome Powell’s hawkish comments and higher oil prices.
After opening weak, the Sensex index managed to gain 697 points, or 1.22 percent, to end at 57,989 points. On the other hand, the Nifty Index rose by 198 points, or 1.16 percent, to close at 17,316 points.
Tuesday’s gain came on the back of positive inflows from foreign investors reaching Rs.385 crore. Experts said that hopes for peace in Ukraine are driving a sense of risk around the world. Turkey said on Sunday that Russia and Ukraine had made progress in their negotiations to stop the war, and that the two sides were close to reaching an agreement.
“Markets have been putting a lot of interest in this outcome, somewhat in my opinion…Any headlines indicating progress in negotiations will see a sharp reversal of oil and a rally in stocks in the short term,” said Jeffrey Haley, senior market analyst for Asia Pacific. Oanda.
Rising prices have forced central banks, including the Federal Reserve, to prioritize inflation over easing growth. Central banks, for much of the past year, have described inflation as temporary.
The Russo-Ukrainian war has sent commodity prices, including oil and minerals, soaring, amid fears of supply disruptions. The conflict exacerbated the inflationary pressures caused by a jump in demand as countries opened up in the wake of the lockdowns necessitated by the pandemic.
On Monday, Powell said the central bank should move quickly to raise interest rates to tame inflation. He said that if necessary, the Fed will raise interest rates by more than 25 basis points more than once. The Fed chief reiterated that the central bank would start shrinking its balance sheet by May.
The Fed chief’s statement could have been hawkish during normal times. Now the geopolitical situation is overshadowing everything else. “Markets will remain volatile until some good news comes from talks between Russia and Ukraine,” said UR Bhat, co-founder of Alphaniti Fintech.
RIL, which has the highest weighting in the Sensex and Nifty indices, was up 2.5 percent and accounted for more than a quarter of the gains made by the benchmark indices. Experts said higher crude oil prices could boost refining margins for India’s most important company. Crude oil prices are up 11 percent in the past four sessions, with Brent crude hovering around $115 a barrel.
“Reliance’s gains helped the indices. But other than that, there wasn’t much to cheer the markets on. Local investors were long after,” Bhatt said. Local institutional investors sold shares worth Rs 600 crore on Tuesday.
TCS shares rose 2.1 percent and Infosys 1.8 percent. The two accounted for a quarter of the index’s gains.
Market breadth was slightly negative, with 1,858 shares down versus 1,540 up front. With the exception of four, all Sensex shares rose. Oil, gas and information technology stocks rose further, and their sector indices on the Bahrain Bourse rose 1.9 percent each.