Stock Market: The bulls have been in charge on Dalal Street in the truncated week gone by as the domestic equities witnessed a sharp rally fuelled by across-the-board up move with all the four frontline indices – Sensex, Nifty, Nifty Bank and Nifty Midcap – posting record close.

The BSE’s Sensex jumped 803.14 points, or 1.26%, to close at a record level of 64,718.56, while the NSE’s Nifty rallied 216.95 points, or 1.14%, to end at 19,189.05.

With this, the Indian stock market posted its biggest quarterly gains in nearly two years with the Nifty surging 10% in April-June period.

The market rally was led by a blend of domestic as well as global factors that were supportive of the bulls. Resilient local macroeconomic background, sustained inflow of foreign capital, better corporate performance and hopes of an end in interest rate hikes lifted Indian equity markets to record high levels.

“With positive surprises assisting buoyancy in the global stock market and the advance of the southwest monsoon, the domestic stock market succeeded in marching to new highs with renewed strength. Global investor sentiments were uplifted by a favourable revision in Q1 GDP, a fall in jobless claims, and the positive outcome of the Fed’s US bank stress test,” said Vinod Nair, Head of Research at Geojit Financial Services.

The foreign portfolio investors (FPI) have pumped in more than ₹61,600 crore into Indian equities during January-June period of 2023.

On the back of this rally, the market capitalisation of all BSE-listed companies jumped by more than 13.47 lakh crore in H1CY23 to ₹296.67 lakh crore.

Going ahead, analysts expect the stock market rally may continue in the second half of the year and the Nifty may hit levels of around 21,000 by December-end.

“The second half of CY2023 is also expected to be good for Indian capital markets, subject to the flow of monsoon. Better monsoon and government schemes will help drive rural demand which will be positive for FMCG, consumer durables and nondurables and construction sectors,” said Sudip Bandyopadhyay, Group Chairman, Inditrade Capital.

Bandyopadhyay expects the financial services sector will also continue to perform well on the back of strong credit growth, improving asset quality and upbeat economic growth.

Moreover, he believes the risk on mode of FIIs to remain intact and many emerging market funds moving out of China will be positive for Indian markets. While volatility may persist in the short-term, Nifty and Sensex may continue to scale new highs.

“We may see Sensex around the level of 70,000 and Nifty around 21,000 by the end of December 2023,” Bandyopadhyay said.

Here’s how different asset classes performed in H1CY23.

Equity Market
The benchmark Nifty has rallied nearly 6%, while Sensex has jumped 6.37% YTD. The Nifty Bank index has surged 4.10%.

Broader indices, Nifty Midcap 100 soared 13.47% and the Nifty Smallcap 100 gained 11.36% during the first six months of 2023, significantly outperforming the frontliners.

Among sectoral indices, Nifty Realty and Nifty Auto gained the most over 20% each, followed by Nifty FMCG rallying more than 18%.

Here’s a look at how different sectors have performed:

Sectoral Index           YTD Performance
Nifty Realty                     20.45%
Nifty Auto                       20.11%
Nifty FMCG                     18.16%
Nifty Healthcare              11.69%
Nifty Pharma                    9.29%
Nifty Financial Services      5.67%
Nifty Private Bank             4.85%
Nifty IT                            3.29%
Nifty Energy –                   4.54%
Nifty PSU Bank                 4.82%
Nifty Metal                       7.65%
Nifty Media                     12.46%

Gold
Gold prices in India have risen by around ₹3,000 per 10 grams, witnessing a gain of 5.3% so far this year. The global economic and political uncertainties like the Russia-Ukraine war, inflation and policy tightening by major central banks have played a significant role in keeping the yellow metal prices volatile in the first half of CY2023.

“Gold prices rallied on the back of geopolitical uncertainties and expectations of an end in interest rate hike cycle by different central banks. The sentiment for yellow metal remains bullish,” said Ajay Kedia, Director, Kedia Advisory.

According to Kedia, the recent weakness in the yellow metal was due to the hawkish comments from the US Federal Reserve Chairman Jerome Powell. Moreover, the technical correction in gold was overdue because of the rally witnessed since October last year, he said.

Going ahead, Kedia believes gold prices to remain volatile but gain bullish momentum amid sustaining geopolitical risks, weakness in Indian rupee and uncertainties as we near upcoming general elections in India.

“MCX gold may rise towards ₹65,000 per 10 grams level by this year-end. The support for gold is seen at ₹56,500 level, Kedia said.

Meanwhile, silver prices have fallen nearly 1% YTD, from the levels near ₹70,800 earlier to tad below ₹70,000 now.

“The outlook is bearish in Silver owing to subdued industrial demand from China. Moreover, the recession in the European Union may push demand lower. The US is expected to increase rates two times at least in the H2 of the year. Hence the dollar index is also expected to stay elevated,” said Jigar Trivedi, Senior Analyst – Currency & Commodity, Reliance Securities.

Fixed Deposits
The interest rate hike cycle by the Reserve Bank of India (RBI) may have cheered the investors of fixed deposits. The central bank has raised interest rates cumulatively by 250 basis points since May 2022. However, it has hit a pause button in April and June policies.

With this, the interest rates offered by commercial banks on FDs have risen. Comparatively, the public sector banks have lagged behind the smaller private banks, small finance banks and foreign banks. The average interest rate being offered by the top 10 banks is anywhere around 7.6% for FDs with a tenure of three years.

Currency
The Indian rupee appreciated by around 1% against the US dollar this year, making place among select emerging market currencies that gained against the greenback. Prompt intervention from the Reserve Bank of India (RBI), improving domestic economic scenario and lower crude oil prices have supported the local currency.

“Since the beginning of this year, the Indian rupee has appreciated by nearly 1% and is amongst the few Emerging Market currencies to have strengthened against the dollar. However, RBI’s regular intervention on both sides, kept the local currency oscillated within 80.85-83.00 levels. Rest of the year’s performance will be dependent on the state of DXY amid hawkish Federal Reserve, then factors like geo-political environment would also provide some headwind, but improving Current Account Deficit dynamics will keep any depreciation under check,” said an economist with a private bank.

She expects the trading range for the rupee to be 80-50.84.00 going ahead.

Bond Yields
The yields on the benchmark 10 year bond have dropped by 20 bps since the beginning of this year. The bond yields have traded in the range of 6.90-7.50% during the first six months of CY2023.

While bond yields were at 7.32% at the end of December 2022, they declined to the levels of 7.10% as on June 30, 2023.

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