Bulls take D-Street by storm

Sensex gains 358 points to top 22,700; bank stocks lead surge; Sun Pharma rises nearly 7 per cent

Bulls took charge on Dalal Street again on Wednesday, taking the market to new highs as the nation went to the second phase of polling for the general elections. Gaining the most in more than a month, the Sensex ended at a new record high of 22,702, up 358 points, or 1.6 per cent. The 50-stock NSE Nifty, meanwhile, closed at 6,796, up 101 points or 1.5 per cent, the highest since March 7.

The surge in the market was led by banking stocks, which rose about three per cent, following a report by international rating agency Moody’s saying the Indian banking system was well-positioned to weather any adverse impact of the US Federal Reserve’s decision to taper its bond-buying programme and increase interest rates.

After three days of losses, the market regained strength in the latter part of the day, helped by positive global cues. Most Asian markets ended positive, with some hitting their six-month highs. The European markets opened higher, while the futures index signalled a positive opening for the US markets.

The optimism in most equities markets is fuelled by robust foreign inflows. Experts say the Indian market can continue to do well supported by foreign institutions expected to continue investing in Indian equities. Foreign institutional investors (FIIs) pumped in a little more than Rs 1,000 crore into Indian stocks on Wednesday, according to provisional data on the stock exchanges.

Foreign investors have remained strong buyers of Indian equities this year on hopes of a revival in the economy. Most investors are also betting on a stable government at the Centre in May.

Flows into Indian equities have been among the highest this year, compared with most other emerging markets. So far this calendar year, FIIs have pumped $4.5 billion into Indian stocks.

“India is benefiting from the fact that there are limited options to invest in emerging markets today. In Asia, most FIIs are negative on China,” said Gautam Trivedi, managing director and head of equities, Religare Capital.

The rate-sensitive banking index gained 3.5 per cent,  led by Axis Bank, ICICI Bank and State Bank of India, anticipating further moderation in inflation figures to be released next week.

“Any rally in the market now will be led by banking stocks. Incremental growth in the economy will first benefit the banking sector,” said Rikesh Parikh, vice-president (equities), Motilal Oswal Securities.

Sun Pharma was the biggest index gainer, ending nearly seven per cent higher after brokerages upgraded the stock following the $3.2-billion merger deal with Ranbaxy. Overall, the market breadth was positive as the number of gainers outnumbered declining stocks by a huge margin.

“In the past, India’s equity markets have reacted strongly to unexpected election outcomes. Markets are likely to react positively if a stable government is elected, but might already be partly pricing in a positive outcome based on opinion polls,” said a report by Standard Chartered.