Analysts, though, did not rule out the possibility of the market taking a breather as some intermittent profit booking is likely given the near 10 per cent rise in benchmarks from their recent lows.
“Nifty index rallied more than 10 per cent from the recent correction low and hence a mild pullback cannot be ruled out. Given that the market is rallying on a slowed-down momentum, any sustained close below 15,400 should be treated as a red signal for the short term,” said Nirali Shah, head of equity research at Samco Securities.
During the week, both Nifty50 and BSE-Sensex claimed their intraday and closing lifetime highs reflecting the firm risk appetite of investors who are betting on India’s economic recovery restarting after being stalled in April-May due to the second wave of the Covid-19 pandemic. Nifty50 rose 0.8 per cent for the week, while Sensex climbed 0.7 per cent.
The strong risk appetite of investors was most visible in the midcap and smallcap segments where despite a minor scare on Wednesday, the Nifty Midcap 100 and Nifty Smallcap 100 index outperformed the benchmarks for the week. The Nifty Midcap 100 and Nifty Smallcap 100 indices ended the week 3 per cent higher each.
Another sign that investors are leaving their Covid blues behind and are focusing on rapid economic growth ahead is the 11 per cent decline in the fear index, India VIX, to 14.10 points, the lowest since February 2020, this week.
“Markets have also taken their strength from the March 2021 earnings season and subsequent management commentaries so far, that depict reasonable resilience of earnings to commodity inflation and better preparedness to manage the inevitable impact due to the second wave,” said Taher Badshah, chief investment officer – equities at Invesco Mutual Fund, in a recent note.
While investors’ appetite for riskier sectors such as metals, energy and infrastructure spaces was steadfast, curiously, it was the defensive sectors that led Dalal Street in terms of returns. Out of the top five sectoral indices on NSE, three were defensive in nature.
No surprise then that the Nifty IT index emerged as the biggest sectoral winner of the week with gains of 4.5 per cent followed by Nifty Media’s 3.5 per cent rise and Nifty Pharma’s 2.6 per cent increase.
Next week, investor focus will largely be dominated by economic data as India reports its May retail and wholesale inflation. A persistently higher print may put more pressure on the RBI’s Monetary Policy Committee to start thinking about talking about policy normalisation.
On the global front, investors will keenly await the industrial production and retail sales data in the US and China on June 15 and June 16, respectively, which may set tone for global equities for the remainder of the week.
