Indian shares extend rally as earnings, cooling crude draw foreign buyers

Indian equities continued their upward trajectory on Tuesday, propelled by robust corporate earnings, dropping oil prices, and early indications of renewed foreign investment. The Nifty 50 index climbed 1.58% to reach 23,810.85, while the Sensex advanced 1.62% to 76,917.85. Both indices have surged approximately 5% over the past four trading sessions and are currently touching two-month highs.

This bullish trend stands in stark contrast to the hesitant performance of Asian markets, where technology stocks faced a setback ahead of the US midterm elections, with many investors viewing Indian equities as a potential hedge against global artificial intelligence trade tensions.

Seventeen out of the sixteen major sectors witnessed an upward swing. Small and mid-cap stocks also contributed to the rally, edging up by 0.3% and 1.1%, respectively. Brent crude oil prices experienced a slight uptick of 1%, reaching $106 per barrel, following a 7% decline the previous day. This positive shift was attributed to discussions between Iran and Qatari mediators, alongside the US military strike on Iran's Qeshm island.

Foreign portfolio investors constituted a net buyer for four consecutive sessions, buoyed by anticipations of a potential long-term capital gains tax reduction and consistent earnings. Avinash Agarwal, senior vice president and head of equity at Bandhan Life, opined that the market's prospects could improve further from its present levels, driven by attractive valuations, neutral to positive earnings, as well as the influence of crude oil prices, foreign inflows, and the results of the US midterm elections.

Factors such as favorable tax changes and the rekindling of interest in the artificial intelligence sector, given its potential impact on equities, were deemed crucial near-term influences. Among the heavyweights in the financials and private banks, HDFC Bank and ICICI Bank, which collectively represent nearly 20% of the Nifty 50, demonstrated strong gains of 3.6% and 2.7%, respectively.

HSBC analysts, led by Abhishek Murarka, raised their fiscal 2027 Indian bank loan-growth forecast to 18% from a previous 14%, citing a more compelling valuation outlook for private lenders. Notably, Marico surged by 10% after surpassing its quarterly profit estimates.