Following a significant slump, the Indian stock market indices, Sensex and Nifty, rebounded strongly on June 5. Investors saw the previous day’s fall as a buying opportunity, particularly in the FMCG and IT sectors. Market experts highlighted that despite initial volatility, long-term stability is anticipated if policy continuity is maintained.
Early Morning Surge in Sensex and Nifty
On June 5, Sensex and Nifty opened higher, recovering from the previous session’s steep decline. By 09:30 am, the Sensex had risen by 454 points or 0.6 percent to 72,533, while the Nifty climbed 125 points to 22,009. The market breadth was balanced, with 1,436 shares gaining and 1,406 shares losing. Notably, HDFC Bank, HUL, and ITC were the major contributors to the Nifty’s gains, whereas NTPC, Hindalco, and L&T lagged behind.
FMCG and IT Stocks Drive Gains
The Nifty FMCG index saw a rise of over 4 percent, led by HUL, ITC, and Britannia, which gained between 2.4 and 6.4 percent. IT stocks also contributed significantly to the gains. Gaurang Shah, Senior Vice President at Geojit Financial Services, mentioned that the sell-off provided a buying opportunity at lower levels, despite the choppy and volatile market conditions until government formation clarity is achieved.
Hindalco and BEL Under Pressure
Shares of Hindalco fell nearly 5 percent after the company announced the postponement of the IPO of Novelis. Similarly, shares of PSU stock BEL dropped over 5 percent following a downgrade from brokerage firm CLSA to “outperform” from “buy.”
Historical Context and Expert Insights
Pradeep Gupta, Co-founder and Vice-chairman of Anand Rathi Group, expressed optimism about market recovery, drawing parallels with significant gains seen post-election results in 2014 and 2019. He advised traders to stay resilient amidst political changes to navigate market volatility. On June 4, the Nifty experienced its worst session in over four years due to uncertainties about the incumbent Bharatiya Janata Party’s ability to secure a third term.
Deepak Jasani, Head of Retail Research at HDFC Securities, projected that Nifty might fluctuate between 21,710 and 22,417 in the near term, pending clarity on the final election outcome and government formation. Amar Ambani, Executive Director of YES Securities, emphasized the high valuations of Indian equities and suggested that another 10 percent correction might be possible. However, he assured that markets would stabilize with a stable coalition.
Strong Market Recovery on June 5
In the subsequent trading session on June 5, Sensex and Nifty executed a remarkable recovery, each surging over 3 percent. The BSE Sensex surged by 2,303 points to close at 74,382, while the NSE Nifty50 ended at 22,620, gaining 736 points. Both indices reached intraday highs of 74,535 and 22,670, respectively.
This recovery was supported by robust performance in the financial services and IT sectors. At 10:15 am on June 6, the Sensex was up by 514 points or 0.7% at 74,896, and the Nifty 50 was up by 168 points at 22,790. However, healthcare and FMCG stocks declined after significant gains in the previous session. Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, attributed the rise to several factors, including better-than-expected GDP numbers, strong US market performance, the arrival of the monsoon, and a reduction in the fiscal deficit.
Surge in Nifty PSU Bank Index
The Nifty PSU Bank index continued its upward trend, surging up to 4.4 percent in intra-day trading on June 6. This followed a 2.5 percent jump on June 5, driven by the confirmation of the BJP-led NDA forming the government at the Centre. All PSU Bank constituents experienced gains, with Indian Overseas Bank, CBI, Union Bank of India, and Bank of Maharashtra rising over 5 percent each. The index has surged by 72 percent over the past year and by 28 percent year-to-date in 2024.
Services Sector Performance and NSE Milestone
In May, India’s services activity growth declined to a five-month low due to waning domestic demand, according to a survey. However, record-breaking export growth and a surge in job creation were also noted. The HSBC India Services Purchasing Managers’ Index, compiled by S&P Global, fell to 60.2 from 60.8 in April but remained above the 50 threshold, indicating expansion.
On June 5, the National Stock Exchange of India (NSE) set a new global record for the highest volume of transactions processed within a single trading day. The NSE processed 19.71 billion orders and executed 280.55 million trades, as announced by NSE’s CEO, Ashish Chauhan.
The recent market recovery, driven by gains in FMCG and IT stocks, indicates investor confidence despite initial election-related volatility. As experts suggest, the market’s long-term stability hinges on policy continuity and the formation of a stable government coalition. Investors and traders are keenly awaiting further insights from government policy directions and the upcoming Union Budget.
