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Sensex, Nifty up 2.5% each as China cuts key lending rates, FM foresees 8.9% GDP growth for FY23

At noon, all sectoral indices were in the green, with auto, financials, capital goods, FMCG, healthcare, metals and realty indices adding 2-3 percent each

May 20, 2022 / 12:02 PM IST
Stock market,share market

Stock market,share market

The Indian stock market recouped the previous day’s losses and was almost 2.5 percent higher around noon on May 20 on strong global cues after China cut key lending rates.

At 11.49 am, the Sensex was up 1,305.79 points, or 2.47 percent, at 54,098.02, and the Nifty was trading 396.40 points, or 2.51 percent, higher at 16,205.80.

All sectoral indices were in the green, with auto, financials, capital goods, FMCG, healthcare, metals and realty indices adding 2-3 percent each.

The BSE midcap and smallcap indices are up over a percent each.

Here are the factors pushing the market higher:

Close

1 China cuts key lending rates

China cut its five-year loan prime rate (LPR) by 15 basis points on May 20, a sharper cut than expected, as authorities seek to cushion an economic slowdown, though it left the one-year LPR unchanged. The five-year rate influences the pricing of mortgages.

Senior officials have pledged further measures to fight a slowdown in the world's second-biggest economy, hit by COVID-19 outbreaks that prompted stringent measures and mobility restrictions and causing huge disruptions to activity, according to Reuters.

The Chinese central bank has pledged to step up support for the slowing economy but analysts say the room to ease policy could be limited by worries about capital outflows, as the US Federal Reserve raises interest rates.

Catch all the market action on our live blog

2 Strong Asian markets

Asian markets were trading on a robust note as China cut key lending rates to stimulate the economy.

Among the Asian names, Hang Seng added over 2 percent followed by Kospi, Nikkei and Sanghai adding over a percent each. SGX Nifty was trading at 16,177 level, up 392 points or 2.48 percent at 11.21 am.

Also read: Metal stocks rally as China cuts key lending rates to stimulate economy

3 FM signals speedy recovery, projects 8.9% GDP growth

India's economic growth is likely to be robust at 8.9 percent in the current financial year, reflecting the country's strong resilience and speedy recovery, Finance Minister Nirmala Sitharaman has said.

She also expressed confidence that India will continue to achieve a high growth rate in the next financial year as well, the finance ministry said in a statement.

The finance minister said India's economic growth in the current financial year has been robust and is estimated to be 8.9 percent, the highest among all large economies.

4 All sectors in the green

All sectoral indices are trading in the green, with auto, financials, healthcare, realty, metals, oil & gas and capital goods indices adding 2 percent each. The BSE midcap and smallcap indices traded higher by over a percent each.

RIL, HDFC Bank, Infosys, ICICI Bank and HDFC were the top positive contributors, while Reliance Industries, Infosys, TCS and ITC were the most active stocks. About 2394 shares advanced, 598 declined, and 115 shares remained unchanged.

Technical views

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services

The excessive volatility in the market is broadly due to two reasons. Te market has discounted severe monetary tightening by the US central bank, which is likely to take the Fed funds rate to around 3 percent in 2023. It has not fully discounted the probability of the US economy slipping into recession in 2023.

Till there is clarity on the second issue, the “risk-off, risk-on mode” in the market is likely to continue in the near term. It may take a few weeks for the markets to stabilise.

It is important to appreciate the fact that the dominant feature of this market is bearish in the short term. Nasdaq is 30 percent down from the peak and S&P 500 is trading 19 percent lower from its highs. These are reflections of weakness in the market.

FIIs are likely to continue selling since India is the only emerging market where they are sitting on good profits and the market provides the liquidity to sell.

Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One

The opening was painful on May 19 as the Nifty started 300 points lower on massive overnight selloff in US bourses. It caught a lot of momentum traders on the wrong foot who had carried over their longs after a sharp rebound the previous day.

But fortunately, there was no major damage seen during the day as compared to the global screen. Eventually, the tragic weekly expiry day ended with over two and half a percent cut to the previous close.

At this juncture, it’s better to take one step at a time. As far as levels are concerned, 16,000–16,100 once again become a sturdy wall and till the time, it does not get surpassed, we are likely to see selling pressure at higher levels.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Disclaimer: The views and investment tips of experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandip Das
first published: May 20, 2022 12:00 pm
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