Markets claw back some ground; domestic institutions save the day

After Thursday’s deep dive into the red, benchmark indices staged a smart comeback on Friday, as domestic institutions stepped in to save the day and bought shares to the tune of $574 million. Markets also reacted to global cues after the US imposed weaker-than-expected sanctions on Russia. However, foreign portfolio investors (FPIs) continued to sell on Friday, according to provisional data. Interestingly, the Sensex gained the most in Asia on Friday, against previous day’s worst performer tag.

While the Sensex surged 1,328.61 points to settle at 55,858.52, the broader Nifty50 gained 410.45 points to end the session at 16,658.40. However, despite the 2.5% gain, the Nifty50 is still 245 points lower than its 200-day moving average. ICICI Bank, along with the HDFC twins and TCS, contributed over a third of Sensex gains on Friday. While the BSE Smallcap index rose 4.2%, the Midcap index gained 4.07% on Friday. The correction in heavyweight stocks has brought Nifty50 valuation to 19.05 times of its 12-month forward earnings from the October peak of 22.79x, Bloomberg data showed.

Barring Kotak Mahindra Bank, Cipla, Power Grid Corp and Hindalco Industries, all Nifty50 constituents lost value during the week. While BPCL and UPL corrected about 10% in the last five days, Grasim Industries and HDFC Life insurance declined 9% each. The Nifty50 has lost 3.6% during the period, marking its third consecutive weekly loss.

According to Nagaraj Shetti, technical research analyst at HDFC Securities, “The sharp comeback of market on Friday could be a cheering factor for bulls to make a comeback. Further upside from here is likely to encounter the resistance in the short term and one may expect weakness emerging from the lower highs. Immediate support is placed at 16,500 levels.”

Foreign portfolio investors (FPIs) on Friday sold equities worth $594 million, while domestic institutions bough $574 million worth of shares, provisional data on exchanges showed. With Friday’s sale, the FPIs have offloaded $9.3 billion worth of Indian equities so far in 2022. Local investors, including mutual fund and insurance, have bought shares worth $8 billion during the same period. All sectoral indices compiled by the BSE ended in the green with realty, power and metals leading the pack.