The markets have logged strong gains in trade so far on Wednesday, led by Reliance and ONGC after the government reduced windfall tax on fuel exports and domestic oil output. Further, buoyant global cues also aided the sentiment. An overnight rally was seen in US stocks, slight weakness in the dollar and the overall positive sentiment across Asia lifted stocks on Wednesday. Around 13:30 hrs, The BSE Sensex soared over 750 points to 55,500, and the NSE Nifty50 topped 16,550.
Key Factors Why Sensex, Nifty Are Rising
Elimination of Taxes
Due to the government cutting the windfall tax on diesel and aviation fuel shipments by Rs 2 a litre, and scrapping completely a Rs 6-per litre levy on gasoline exports, the most-valued stock on Dalal Street rallied on Wednesday morning. Morgan Stanley said Reliance and other refiners will see a reduction in overhang and equity valuations and should start pricing in high sustainable energy margins as the government intent gets clear. Reliance alone contributed 165 points positively to Sensex’s positive run today.
Naveen Kulkarni, chief investment officer, Axis Securities, said: “Domestically, the move by the Indian government to reduce tax on windfall gains for Oil and Gas companies is helping heavyweights like RIL and ONGC to outperform.”
Dollar Index
The dollar index fell for the fifth session after analysts trimmed bets on the pace of US Federal Reserve interest rate hikes. Earlier, analysts were expecting a 100 basis point hike in its next fed policy after the US recorded 41-year high inflation but now they expects 75 basis points. Investors are seen staying a bit cautious ahead of a European Central Bank policy meeting. The next Fed meeting is on July 26-27.
FPI Inflows
Provisional data showed foreign portfolio investors (FPIs) were turned buyers of domestic stocks on Tuesday to the tune of Rs 976.4 crore. Foreign investors have started buying domestic equities of late, which has restricted their total equity outflows to Rs 8,847 crore so far in July, as per NSDL compared with Rs 5,0203 crore outflows in June, Rs 39,993 crore ouflows in May and Rs 17,144 crore outflows in April.
Nifty Technical Outlook
Santosh Meena, head of research, Swastika Investmart Ltd., said: “Technically, Nifty has made bottomed out, however, 16,800-17,000 will be an immediate and critical supply zone where we can expect some profit booking. On the downside, 16,300 will be the first support level while 16,000 is a sacrosanct support level.”
What Should Investors Do Now?
Kulkarni said: “We advise investors to gradually increase allocation to equity, especially since FII selling pressure has significantly ebbed in recent times. Some sectors we like are Banks, Auto, and Capital Goods.”
Meena said: “Traders/investors are advised to use any small dip as a buying opportunity however thing won’t be as easy as it was last year therefore stock selection will be important.”
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