Indian shares have stood out in a week of turmoil for global markets, with the country's benchmark indices recording their best session in seven months on Thursday even as technology stocks plunged around the world. The rally, driven by a slide in oil prices and a rush of foreign money into Indian equities, has left Indian markets looking resilient at a moment when much of Asia has been swept up in a sell-off.
The Nifty 50 and the BSE Sensex have now gained for six sessions in a row. On Thursday, the Nifty 50 rose 2.4 per cent and the Sensex rose 2.6 per cent, their strongest single-day performance in seven months. The Sensex closed at a level that took its winning streak to six sessions, while the Nifty 50 closed at 24,536.6.
The gains came as Brent crude fell below 100 dollars a barrel, easing one of the biggest worries for India's economy, and as investors bet that the Democratic Party's sweep of the United States midterm elections could hasten an end to the conflict between the United States and Iran.
Foreign institutional investors were at the heart of the rally. They bought stocks worth about 150 billion rupees, or around 1.6 billion dollars, on Thursday, their biggest single-day net purchase in nearly six years, according to provisional exchange data.
The buying marked a sharp reversal after months of sustained outflows from Indian equities, and it reflected a rotation of global money out of artificial intelligence-linked trades and into markets that had lost out while capital chased the technology boom.
The contrast with the rest of the world could hardly have been starker. Sentiment turned risk-averse overnight after a steep sell-off in American technology stocks. The Nasdaq sank 5.5 per cent, while the Dow Jones and the S and P 500 slid 3.4 per cent and 4.4 per cent respectively, after weak results from chipmaker Qualcomm and concerns over slowing spending on artificial intelligence infrastructure.
The technology rout intensified after the Democratic victory in the American midterms raised concerns about greater regulatory scrutiny and possible curbs on the expansion of artificial intelligence data centres.
Asian markets followed Wall Street lower on Friday. South Korea's Kospi fell 8 per cent and Japan's Nikkei fell 5 per cent, as technology-heavy markets across the region came under pressure. The Philadelphia Semiconductor Index had tumbled more than 12 per cent in the American session, underlining how sharply sentiment had turned against the chip and hardware companies that had powered the global rally in artificial intelligence shares.
Indian shares, by contrast, were expected to open only modestly lower on Friday. Gift Nifty futures stood at 24,460 as of 7:49 in the morning, indicating a weaker start for the benchmark Nifty 50, but the indicated decline was relatively contained compared with the severe global sell-off. Analysts said the lower crude price and India's limited direct exposure to the artificial intelligence hardware trade were providing some insulation.
Hariselvan Radhakrishnan, founder and chief executive of HST Wealth, said the contained decline suggested that cheaper oil and limited exposure to artificial intelligence hardware were cushioning Indian markets.
Domestic markets are nevertheless likely to face a volatile session, with the possibility of consolidation and profit-booking after the benchmarks' winning streak, according to analysts. After six straight sessions of gains, some investors are expected to lock in profits, and the global mood remains fragile.
The question for the coming days is whether the return of foreign capital marks a more sustained reversal in investor sentiment towards India, or a brief pause in a longer period of caution.
The rupee has also drawn support from the return of foreign flows. The Indian currency has advanced 0.5 per cent so far this week, hitting a two-week high of 94.32 against the dollar in Thursday's session before settling at 94.4750. The rupee has remained under pressure for much of the year and has relied heavily on intervention by the central bank, but it has found relief this week from the two factors that had weighed on it for months: oil prices and equity flows.
Oil prices have retreated on expectations that the Republican Party's losses in the American midterm elections could constrain President Donald Trump's political room to sustain the conflict with Iran, while the retreat from artificial intelligence-linked technology stocks is bringing Indian equities back into focus.
The broader story of the week is one of rotation. For much of the year, global capital has chased artificial intelligence stocks, leaving markets like India, which have relatively little exposure to the hardware trade, on the sidelines. The sharp reversal in those trades is now redirecting money towards economies that benefit from cheaper oil and steadier domestic demand.
India, as a large importer of crude oil, gains directly when oil prices fall, since lower import costs ease inflation, narrow the trade deficit and give the central bank more room to support growth. That logic has been at work all week, and it explains why Indian equities have been able to rally even as technology shares have tumbled.
Corporate results have added to the positive mood at home. Bharti Airtel missed second-quarter profit estimates as higher network operating costs offset gains from subscriber additions and upgrades to costlier plans, but several other large companies reported stronger numbers. Titan beat second-quarter profit estimates, boosted by a one-time gain and resilient demand for its higher-margin diamond-studded jewellery.
Life Insurance Corporation of India reported a rise in September-quarter profit, aided by growth in its group insurance business. Oil and Natural Gas Corporation posted higher second-quarter profit as a surge in crude prices during the period lifted margins, while Britannia beat September-quarter profit estimates on steady demand for packaged foods.
For investors, the coming sessions will test whether the rally has staying power. The global sell-off in technology shares may yet deepen, and a further deterioration in sentiment could drag Indian markets down with it, even if the country's fundamentals look comparatively strong.
But for now, India has managed something few other major markets have achieved this week: a sharp rally built on falling oil prices and returning foreign money, at a moment when the rest of Asia has been counting its losses. The resilience has been noticed, and traders will be watching closely to see whether the foreign inflows that powered Thursday's record buying continue in the days ahead.
(Reporting based on Reuters.)