From the lows of March 20, 2023, Nifty has rallied more than 10,00 points. For the Bank Nifty, it has been 3,000 points in the last 17 sessions (7.6 percent). The broader markets have done quite well too but what are the key factors that caused this?
FII aggression on the short side has been a key factor
Net shorts are calculated by deducting the longs from the foreign institutional investor (FII) short positions on Index Futures. FII net short positions had swelled to record levels of near 1,94,000 contracts when Nifty fell to 16,828 on March 20, 2023. With the markets gaining momentum on the upside, FII were forced to cover out the shorts which gives a fillip to the Nifty.
| Nifty level | Net Short Positions (In contracts) | Short Position | ||
| March 20 | 16828 | 1,94,000 | 91% | |
| April 13 | 17730 | 29,000 | 61% | |
FII reversed trend and started buying in cash market
After selling non stop for past many months, FII started buying in cash market towards the end of March. They have not sold in cash market in past 10 sessions.
| Date | FII net Buys (Rs. In Cr) |
| 13-Apr-23 | 222 |
| 12-Apr-23 | 1908 |
| 11-Apr-23 | 343 |
| 10-Apr-23 | 883 |
| 06-Apr-23 | 476 |
| 05-Apr-23 | 807 |
| 03-Apr-23 | 322 |
| 31-Mar-23 | 358 |
| 29-Mar-23 | 1245 |
| 28-Mar-23 | 1531 |
| TOTAL | 8094 |
(Source: Provisional Data on NSE/BSE)
Rate Hiking cycling nearing an end globally- That is the hope!
Street senses that most global central banks may pause interest rate hikes or be nearing a peak, with some forecasting some possible monetary loosening towards the end of 2023 or early 2024 due to sluggish economic growth. Key to track would be any change in Feds monetary policy.
RBI in its recent policy also paused after hiking rep rates by 250 bps in past 1 year though RBI Governor cautioned that ‘it’s a pause and not a pivot’
Valuations reasonable post correction
Nifty corrected 2,000 points from its peak of 18,888 on December 1, 2022 and that correction made valuations more palatable. Nifty's PE dropped to around 17.5x one-year forward earnings which was mostly in line with its 10 year average and a sharp downtick from near 20x forward evening.
Key tracking points from here on
Valuations are back around 18.6x which is not as cheap as a year back and FII short positioning has also come down considerably as we have witnessed massive short covering.
Key triggers to track from here on will be:
1. Ongoing earnings season as the street is still building in mid teen growth in FY25 Nifty EPS which could get scaled down owing to global slowdown.
2. Fear of a weak monsoon looms due to El Nino threat: Skymet expects the upcoming June-September monsoon to be 'below normal' to the tune of 94 percent of the long period average which has raised concerns about food grain production in INDIA.
3. FII inflows seem to have turned the corner but need to see this last.
4. Fed next meeting in May 2023 which is scheduled for May 2-3 will be crucial to understand how many rate hikes they have in store.
(Edited by : Anshul)
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Lok Sabha Election 2024: What rural Delhi wants
May 16, 2024 10:10 PM
Over 50 onion farmers detained in Nashik ahead of PM Modi's visit
May 16, 2024 11:14 AM
Why Google CEO is cautiously optimistic about the election year
May 16, 2024 9:51 AM
Mark Mobius reveals how markets will react if NDA wins 400+ Lok Sabha seats
May 15, 2024 8:09 PM