FDI reforms, Brexit fears easing offset Rexit; Sensex up 241 pts

Moneycontrol Bureau

Equity benchmarks gained nearly a percent on Monday, tracking rally in global peers after receding fears of a Brexit vote. Raising FDI limits in various sectors also boosted sentiment but the market shrugged off RBI Governor Raghuram Rajan's exit. Indices started off on a negative note after Rajan decided not to go for second term as RBI governor but the reaction could not last for long.

The 30-share BSE Sensex rose 241.01 points or 0.91 percent to 26866.92 and the 50-share NSE Nifty gained 68.30 points or 0.84 percent at 8238.50 while the broader markets underperformed. The BSE Midcap and Smallcap indices advanced 0.4 percent each.

Experts expect the rally may continue and the Nifty may surpass 8300 during the week if Britain's public opinion comes true on June 23, when the UK referendum will be held to decide whether the country to remain in European Union or exit. They say after Brexit event, the market will start concentrating on monsoon, GST Bill and June quarter earnings.

Rakesh Jhunjhunwala of Rare Enterprises said bull markets will climb a wall of worry, adding that now the interest rate cuts are being transmitted by the banks to the customers and inflation is down.

Going forward, earnings will remain a key trigger for the market and he would be watching the first quarter closely, Vallabh Bhanshali Chairman of Enam Securities said.

With regards to Brexit, Bhanshali said, if it happens the market may not react too much because the news is already discounted.

Globally markets rallied smartly after recent public opinion ahead of Britain's referendum indicated that there are high chances of UK staying in European Union. France's CAC, Germany's DAX and Britain's FTSE traded 3 percent higher each. More than 1 percent rally in US futures also suggested positive opening on the Wall Street. Asian markets like Nikkei and Hang Seng ended higher by 2.3 percent and 1.7 percent, respectively.

Oil prices also increased further. Brent crude futures gained 1.67 percent at USD 49.99 a barrel and US oil futures rose 1.52 percent to USD 48.71 a barrel (at 16 hours IST).The rupee ended lower at 67.30 a dollar, down 22 paise after Rajan's exit.

Meanwhile, the Narendra Modi-led government has increased foreign investment limits in sectors like aviation, pharma, airports etc. It has approved 49 percent FDI in defence under automatic rule but FDI above 49 percent in defence will be approved through government route on case-to-case basis. Greenfield aviation projects, brownfield airport projects, broadcasting carriage services and animal husbandary sectors are also opened for 100 percent FDI. The government has approved 74 percent FDI in brownfield aviation projects under automatic route and beyond 74 percent will be under government route.

SpiceJet, BEML, Reliance Defence, Dish TV, Interglobe Aviation and Dr Reddy's Labs gained 1-8 percent.

Infosys (up 2.57 percent), Tata Motors (up 3.98 percent) and Tata Steel (up 3.27 percent) boosted by expectations of a positive outcome from the Britain's referendum.

Among others, TCS, Reliance Industries, L&T, Bharti Airtel, SBI and ONGC rose 1-3 percent while ITC, Asian Paints, Axis Bank, Sun Pharma, HUL and Lupin were marginally lower.

The market breadth was positive as about 1380 shares advanced against 1187 declining shares on Bombay Stock Exchange.