After a listless showing for the past few sessions, Dalal Street roared back to life on the first trading day of September as robust macroeconomic data and strong global cues triggered an across-the-board rally.
The Sensex surged 555.75 points or 0.86 percent to finish at 65,387.16, while the Nifty rallied 181.50 points or 0.94 percent to 19,435.30.
“Domestic markets made significant gains, buoyed by favourable global cues, a higher-than-expected domestic manufacturing PMI, and positive GDP growth data. This robust economic outlook propelled key manufacturing sectors to lead the rally, while strong sales figures generated increased interest in auto stocks,” said Vinod Nair, Head of Research at Geojit Financial Services.
“The positive opening in global markets provided additional momentum for investor sentiment, particularly as US PCE inflation aligned with expectations,” he added.
Here are the key factors behind the rally –
Strong Economic Fundamentals
India's Gross Domestic Product (GDP) growth rate hit a four-quarter high in April-June, rising to 7.8 percent, the Ministry of Statistics and Programme Implementation said on August 31.
At 7.8 percent, the latest quarterly growth number is slightly above expectations. A poll conducted by Moneycontrol had shown economists expected GDP growth for the first quarter of 2023-24 to come in at 7.7 percent.
Meanwhile, the Reserve Bank of India (RBI) had forecast a growth rate of 8 percent.
The Indian economy had expanded by 6.1 percent in January-March and 13.1 percent in April-June 2022.
Also Read: India’s GDP numbers puzzle economists
According to Gaura Sengupta, India economist at IDFC First Bank, pick-up in private consumption growth and continued strong growth in the capex cycle augur well for the economy.
"Consumption growth is likely to be led by urban demand, with strong real urban wage growth and nascent signs of recovery in rural demand. Capex cycle has been supported by government with sharp rise in capital expenditure in April-June by both Centre and state governments," Sengupta said.
GST Signals
The Goods and Services Tax (GST) revenues for August 2023 have shown a growth of 11 percent year on year, Revenue Secretary Sanjay Malhotra told news agency PTI on September 1.
The collection from Goods and Services Tax (GST) was Rs 1,43,612 crore in August 2022.
''Roughly numbers are in the range of 11 percent year on year growth as in earlier months,'' Malhotra told reporters.
An 11 percent growth roughly translates to around Rs 1.60 lakh crore.
He was replying to a question on the expected GST revenue numbers for August, the data for which will be released later on Friday.
Auto Sales
Auto stocks were among the top performers on the bourses after companies announced healthy sales for August.
Shares of automobile major Maruti Suzuki extended their gains from the previous session and soared 4 percent to hit a fresh record high of Rs 10,397.95 on September 1 after the company reported its highest-ever monthly sales numbers in August.
The country’s largest carmaker sold a total of 1,89,082 units in August 2023, which is its highest-ever monthly sales volume.
Total sales in the month include domestic sales of 1,58,678 units, sales of 5,790 units to other original equipment manufacturers, and exports of 24,614 units.
August Auto Sales: Check how India's top auto-manufacturers have performed
Mahindra & Mahindra (M&M) in a release said that the company's overall auto sales for August 2023 stood at 70,350 vehicles, registering a growth of 19 percent year-on-year (YoY), including exports. In the Utility Vehicles segment, M&M recorded its highest-ever sale of SUVs at 37,270 units in the domestic market, and overall 38,164 units, including exports.
However, Bajaj Auto's total two-wheeler sales slumped 20 percent YoY to 2.85 lakh units in August as its domestic dispatches went down massively.
PMI boost
India's manufacturing sector activity continued to expand in August, with the S&P Global Purchasing Managers' Index (PMI) rising to a three-month high of 58.6, data released on September 1 showed.
The manufacturing PMI stood at 57.7 in July.
The gauge of manufacturing sector activity in August is above the key level of 50, which separates expansion in activity from contraction, for the 26th month in a row.
"The PMI results for India painted a vibrant picture of the nation's manufacturing landscape in August," Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said.
FII Inflows
Foreign investors continued to repose faith in Indian equities in August, which saw the sixth straight month of inflows.
As per exchange data, FIIs bought Indian shares worth a net $1.6 billion last month through August 30, even as they withdrew more than $6 billion from Taiwan, South Korea and Indonesia.
Global Cues
World stocks were steady on Friday as investors digested China's latest moves to bolster its flagging economy before turning to US jobs data later for clues amid hopes that the Federal Reserve will hit the pause button this month.
Falls in US Treasury yields this week weighed on the dollar, which was on track to snap a six-week winning run ahead of the pivotal US non-farm payrolls figures, due before the opening bell on Wall Street.
Many analysts expect the Fed to leave interest rates unchanged in September, with a 50:50 chance of a hike when it meets again in November.
Meanwhile, China's factory activity surprisingly returned to expansion in August, beating estimates. Supply, domestic demand and employment improved, suggesting official efforts to spur growth might be having some effect.
China stepped up measures to boost the economy, with top banks paving the way for further cuts in lending rates and Beijing also cutting the amount of funds institutions need to hold in foreign exchange reserves.
Disclaimer: The views and investment tips expressed by 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.
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