Sensex ended up 834 points or 1.7 per cent to close at 49,398.29 while Nifty ended up 239.85 points or 1.7 per cent at 14,521.15. India’s volatility index slumped over 6 per cent to 22.90 level. The broader market outperformed the Sensex with BSE MidCap index rallying 2.3 per cent and the BSE SmallCap index surging 1.7 per cent.
Stock indices fell almost 2.2 per cent in the last two sessions amid growing concerns that the market is overheated. Fund managers said continuous foreign portfolio investor (FPIs) flows in the past three months helped investors ignore steep valuations.
“Sustenance of FII flows is critical to the market especially since valuations are elevated now. If we see a reversal, there can be a risk,” said Harsha Upadhyaya, CIO-Equity at Kotak Mahindra Asset Management Company. He said FPI flow tends are still positive.
FPIs provisionally bought Indian shares worth Rs 257.55 crore on Tuesday, which is lower than average daily inflows seen recently. So far in January, FPIs bought nearly Rs 20,000 crore worth of Indian shares.
Elsewhere in Asia, Nikkei gained 1.4 per cent and Hong Kong’s Hang Seng index gained 2.7 per cent. The Kospi in South Korea gained 2.6 per cent and in Taiwan, the Taiex index gained 1.7 per cent.
At home, experts believe the Nifty upside maybe capped in the short term at 14,600-14,700 also because strong December quarter results by India Inc are priced in.
Brokerage Prabhudas Lilladher has increased its 15-month Nifty target by 5 per cent to 15,137 but said it cannot rule out the market rally taking a pause going ahead.
“Markets are driven by hopes of structural economic recovery and high levels of global liquidity and record FII inflows even as DIIs remain sellers on the back of redemption pressures,” the firm said in a note. “While Covid-19 vaccination programmes take off in India give us the confidence of growth revival, we don’t rule out markets taking a pause and near term correction around or after the budget.”