By laksh5382 
Benchmark indices extended Friday’s gains into Monday, with the Nifty posting its biggest two-day gain since early June. However, market experts are unsure whether the gains will be sustained or prove fleeting.
After falling 11% from its October 1 record, Nifty has recovered nearly 4% from its recent low of November 21 in two sessions. The recovery was led by a rise in stocks like Power Grid Corp of India, Larsen & Toubro, Tata Consultancy Services. UltraTech Cementand Apollo Hospitals Enterprise.
Foreign institutional investors made net purchases in Indian equity prices Rs 9,948 crore, while domestic institutions net sold shares 6,908 crores. HDFC Bank stock rose 2.3%, contributing most of Monday’s gains, as the increase in its weighting in the MSCI index took effect. India may see net passive FII inflows of around $2.5 billion, according to Nuvama Institutional Equities Thanks for the MSCI changesWhich also includes $1.9 billion from HDFC Bank.
Manish Sonthalia, chief investment officer at MK Investment Managers, termed the correction as a “potential temporary bounce back” after sustained declines. Despite demand picking up on the back of a good harvest, government spending and the wedding season, the worry is that a sustainable bottom has not yet emerged. , he said, “With the low risk already picked, the strategy of buying on dips is no longer tenable. Moreover, the slowdown in earnings growth increases the likelihood of valuations being squeezed in the near term.”
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Goldman Sachs said in a November 19 report that India’s slowing economy is hurting corporate earnings. MSCI India’s September quarter earnings fell short of analysts’ expectations in the third quarter, which was a bigger success. “As a result, MSCI India CY2024 earnings saw a sharp 3% cut over the past six weeks, erasing all the upgrades seen in the first three quarters of the year,” the report said. More importantly, earnings sentiment, which tracks the breadth of analysts’ revisions, has deteriorated significantly for the broader BSE 200 index in the past month and hit a two-year low. Goldman Sachs analysts expect the downgrade cycle to continue in the coming quarters.
On Monday, both Nifty and Sensex closed 1.3% higher at 24,221.90 and 80,109.85 points respectively. Among sectoral indices, Nifty PSU Bank, Nifty Realty and Nifty Bank were the best performers with gains of 2-4% each.
Interestingly, Nifty had slipped below its 200-day moving average of 23,550 points but has since regained the key level, said Kukunal Parar, vice-president, Choice Equity Broking. “This shows there is still momentum in the recovery,” he said. “If Nifty 50 crosses the 24,500-mark, there is a strong possibility that it may set a new all-time high,” Parar said.
FIIs have been net sellers and withdrawals in recent days 91,933.6 crore more in October 12,242.25 crore till Monday in November. There has been increased uneasiness among investors due to the indictment of Adani Group officials in America.
However, some market experts believe the continued jitters have opened up an opportunity to propel India’s multi-year growth story.
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CLSA investment analyst Vikash Kumar Jain said last week that a relief rally could be formed, supported by reduced FII selling, continued DII buying and continued IPO enthusiasm. On Friday, CLSA raised its allocation to India to 20% overweight, reducing its exposure to China in a strategic reversal.
Ashish Gupta, chief investment officer, Axis AMC, said there is a need to keep an eye on whether earnings growth improves in the second half of this financial year. “If it is disappointing, market momentum could be disrupted,” he cautioned.
Gupta says that in addition to earnings growth trajectory, investors should also keep an eye on dollar strength and US yields under the Trump presidency. US bond yields rose to 4.4% from 3.6%, turning foreign investors into net sellers. Rising US yields have been a headwind for equity investors, especially those dependent on foreign capital inflows. Although the rupee remains relatively stable against other currencies, continued dollar strength and currency depreciation in other emerging markets including China could pose challenges. “In such a scenario, the RBI would need to set an appropriate level of the rupee,” Gupta said.