Indices post highest gains in over 3 weeks

Mumbai: India’s equity indices jumped 1.8% on Tuesday in a relief rally that resulted in them posting the highest gains in over three weeks. Money managers and analysts said markets were oversold after the recent sell-off, terming the rebound a ‘dead cat bounce’ as concerns linger over the likelihood of an economic slowdown amid monetary policy tightening by central banks to contain inflation.

The Sensex ended 934.23 points or 1.81% up at 52,532.07 and the Nifty closed 288.65 points or 1.88% higher at 15,638.80. India’s Volatility Index or VIX ended 5.66% down at 21.14, suggesting receding fears of another sharp sell-off immediately as traders expect another 2% gain in the indices soon.

“It is more of a bounce from an oversold level and the Nifty could go up to 15,800-15,900,” said Abhilash Pagaria, head,

Alternative and Quantitative Research. “That would be an opportunity to take fresh shorts. I won’t be bullish until Nifty settles above 16,050. Most importantly, only steady FII inflows can lead to a decisive rally.”

Foreign portfolio investors (FPIs) extended their selling spree, dumping Indian shares worth ₹2,701.21 crore on Tuesday. Domestic institutional investors bought shares worth ₹3,066.41 crore.

So far in June, foreigners have been sellers to the tune of Rs 37,000 crore.

They have pulled Rs 2.05 lakh crore out of equities since January.

Elsewhere, Asian markets ended firm, while the Stoxx Europe 600 was up 0.5% at the time of going to print after giving up a portion of early gains.

European Central Bank (ECB) president Christine Lagarde said on Monday the risk of an abrupt correction on Europe’s financial and housing markets is high, according to Reuters.

“While the correction in asset prices has so far been orderly, the risk of a further and possibly abrupt fall in asset prices remains severe,” she said.

Lagarde’s comments come in the wake of central banks worldwide tightening monetary policy to bring inflation under control. Such moves have hurt global equities amid a flight to safe-haven assets, resulting in dollar strengthening and bond yields rising.

The Nifty is down 5.7% for June and has dropped nearly 10% since January. Money managers said the challenges to the economy and corporates have made it even more difficult to predict market direction.

“There are headwinds on the global side but most of the valuation froth is gone. It is difficult to say whether there will be further correction,” said Harsha Upadhyaya, CIO, equity,

Asset Management Co. “Markets have come down from expensive to fair valuations. The next earnings season is likely to disappoint broadly so we may see more volatility.”

On Tuesday, watch-to-jewellery maker

gained the most among Sensex constituents, ending 6% up. , , Dr Reddy’s Laboratories, , , and were the other top gainers, closing 2-4% higher. The broader market also bounced back after the brutal sell-off on Monday. The BSE 150 MidCap Index rose 2.5% and the BSE 250 SmallCap Index jumped 3%. Gainers outnumbered losers 2,477 to 853 across categories on the BSE.

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