After the initial uptrend, the benchmark gradually drifted lower, but healthy traction in banking and IT heavyweights in the second half changed course. Most sector indices participated in the move, and the broader markets also posted healthy gains, with both the mid-cap and small-cap indices gaining over a percent each.

“The recent recovery shows that we are only mirroring global markets, particularly the US, and it could continue to be so in the future. In addition, upcoming macroeconomic data and car sales numbers will also be in focus,” said one analyst. In fact, the Sensex is down over 10 percent since April 4, when it closed at 60,611. If there was concern then about the pace of resolution by the major central banks, particularly the US Federal Reserve, there was concern about the impact of inflation and interest rate hikes on global growth.

Asian markets rose on Friday after a strong performance on Wall Street the previous day. European equities rose, heading for their best weekly gain since mid-March as investors returned to risky assets, lured by lower valuations. US Secretary of State Antony Blinken’s statement that the United States would not prevent China from expanding its economy, but that it would abide by international rules, was well received by markets.

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Total FPI outflows in May now stand at Rs 53,790 crore. “Relatively rich valuations in India, rising US bond yields, a strengthening dollar and concerns over a potential US recession fueled by aggressive monetary tightening are factors in FPI’s retreat. Recently there have been signs of FPI selling exhaustion, while DII and retail buying are proving to be a strong counterbalance to FPI selling. At higher levels, FPIs can still be sold. When global markets are stable, FPI sales are easily absorbed by DII plus retail purchases,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.