Equity benchmarks rallied Monday, with the Sensex now having risen close to 1000 points from the low seen the Friday before last. Dealers said hopes of increased money flows into equities because of the recent weakness in commodity prices, as well an improvement in India’s macroeconomic fundamentals, were driving the uptrend, brokers said.
Brokerage house Nomura has listed India, Korea, Thailand and Philippines as the biggest likely winners in terms of higher growth, lower inflation and/or better economic fundamentals, if the fall in commodity prices sustained.
The BSE Sensex closed at 19,169.83, up 153.37, up points over the previous close. The Nifty gained 51.30 points to close at 5834.40.
Metals, banks, capital goods and realty shares were among the best performers as bears scurried to square up their short positions in anticipation of further buying.
Tata Steel, Hindalco, Coal India, Larsen & Toubro, HDFC Bank, Bhel and Reliance Infra were among the key gainers in the Nifty, climbing 3-4 percent.
Reliance Communications was the star performer among midcaps, surging around 13 percent. HDIL, Unitech and Engineers India were the other notable performers in this space, climbing 8-12 percent.
However, near term outlook on the market is divided.
“The macro environment is certainly improving, but it is not translating into earning numbers; you are seeing some disconnect between the movement in stocks versus whatever improvement you are seeing in the earnings or lack of improvement in earnings,” Sanjeev Prasad of Kotak Securities said in an interview to CNBC-TV18 earlier today.
Brokerage house Morgan Stanley said there were early signs of a reversal in the stagflation (high inflation- declining growth) environment with the government’s steps to correct the bad growth mix of high fiscal deficit and low investment.
“We believe that macro stability indicators-CPI inflation and current account deficit- will continue to show gradual improvement over the next 6-12 months. We expect the government to continue to take policy measures to increase investment spending to slowly improve productivity and growth mix,” the brokerage said in its note to clients.
Today’s rally was broad-based with mid and small cap shares rising in line with their large cap counterparts.
Brokerage house Edelweiss said that this was a good time to build a portfolio of quality midcaps.
“The broader market has corrected more than the Large-Cap stocks in the recent past due to concerns that these companies won’t be able to withstand pressure from a weak macro-economic backdrop. While the macro outlook is still muted and political situation murky, stock valuations are not too demanding,” the brokerage said in its note to clients.
Shares of Titan Industries rallied nearly 6 percent, shrugging off concerns that falling gold prices would hurt its earnings.
The market was firm footed in the last trading hour of the day as investors continued to lap up stocks. The Sensex was up 118.90 points at 19135.36, while the Nifty gained 45.05 points at 5828.15.
The Sensex was consolidating around 19000 levels in the afternoon trade. European markets were trading flat. Japan's benchmark Nikkei average closed up 1.89 percent at 13,568 on Monday.
The Nifty was trading in a narrow band of 5800-5820 in the afternoon trade. Bank Nifty was star performer of the day with close to 2 percent gains. It has rallied close to 11 percent in this series. Rupee depreciated today and was trading above 54 mark. Brent Crude was trading below 100 dollars per barrel while Gold was up 0.7 percent.
The market was holding firm after a long weekend as investors seem to building hopes on a rate cut by the Reserve Bank of India in its monetary policy review on May 3. The Sensex was up 37.92 points at 19054.44 and the Nifty gained 25.25 points to be at 5808.35.
The market opened on a positive note. The Sensex was up 64.62 points or at 19081.08, and the Nifty gained 26.45 points at 5809.55. Investors are building hopes on reform action as the Parliament session resumes today.
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