Markets snap 7-day losing streak, but risks remain

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Mumbai: Indian equities snapped a seven-session losing streak to close nearly 1% higher on Thursday as investors returned to accumulate stocks at lower price levels. Although analysts say that the correction might not be complete, the Reserve Bank’s monetary policy statement which favoured economic growth and prospects of an earnings revival encouraged investors.

BSE’s 30-share Sensex closed 0.97%, or 330.45 points, higher at 34,413.16 points, while National Stock Exchange’s 50-share Nifty rose 0.96%, or 100.15 points, to close at 10,576.85 points. They are still down 4.31% and 4.09% respectively so far in February.

“It is just a bounceback after the recent steep decline. Certain quarterly numbers (company earnings) were also positive which helped,” said Ajay Bodke, chief executive and chief portfolio manager at brokerage firm Prabhudas Lilladher Pvt. Ltd.

Power plant equipment maker Bharat Heavy Electricals Ltd. posted around 64% rise in December quarter net profit while cement maker ACC Ltd reported a doubling of net income.

“It is not clear if the market direction (of Indian stock market) is back to being positive for the near term,” said Hemang Jani, senior vice-president and head of advisory desk at Sharekhan by BNP Paribas.

World markets traded mixed on Thursday. Japan’s Nikkei and Hong Kong’s Hang Seng index climbed 1.13% and 0.42% respectively while European markets traded lower.

“There could be more pain in the global markets as people who were shorting volatility with leveraged positions in the US may still have to unwind,” warned Jani.

Foreign institutional investors’ (FIIs) net inflows in Indian shares so far this year dropped below $2 billion as they sold in the last few sessions.

On the other hand, domestic institutional investors (DIIs) who went slow with their equity investments in January, accelerated inflows into Indian shares in February, taking net inflows in the asset class so far in 2018 to Rs2,856 crore.

“This kind of increased volatility is a part of any market. In India, it is hurting us right now as we saw it after a long time. Investors got complacent,” said Dipen Sheth, head of institutional research at HDFC Securities.

“The long-term outlook stays positive, driven by increased formalization and better tax compliance, though the near-term direction will depend on global cues and corporate earnings growth,” added Sheth.

Market breadth was extremely positive with gainers turning out to be more than three times the number of losers on the BSE. Twenty-three of 30 Sensex stocks closed higher.

Software exporter Infosys Ltd contributed the most to the gains for Sensex with a 2.33% rise. IT companies gained, after peer Cognizant Technology Solutions Corp. managed to grow its December quarter revenue faster than analyst expectations, even as it reported first quarterly loss in its 24-year history, due to a one-time expense on change in tax policylivemint