 "Pay panel, global rally lift stocks")
The S&P BSE Sensex gained 0.8 per cent or 216 points to settle at 26,740 while the Nifty ended a bit above 8,200 at 8,204, up 76 points.
The BSE AllCap and MidCap indices were up one per cent each, while the SmallCap index gained 1.31 per cent.
“Today’s rally is due to a couple of factors. The global markets have staged a recovery, the approval of commission recommendations, coupled with progress of good monsoon, has helped,” said Andrew Holland, chief executive, Ambit Investment Advisors.
The Union Cabinet also cleared the Model Shops and Establishment Act, which will allow cinemas, restaurants, shops, banks and other such workplaces to be open 24X7.
The Cabinet also approved the mineral exploration policy, which could pave way for auction of 100 prospective mineral blocks.
Commission recommendations will directly benefit about 10 million central government employees and pensioners. The approval came when the stock markets were hit badly by the referendum in the UK to exit the European Union.
U R Bhat, managing director, Dalton Capital Advisors, said, “There was enough indication about the announcement (seventh pay commission). But, since the timing is after Brexit, it has come as a breath of fresh air. Also, domestically, things are improving. The economy is going in the right direction.”
Central government employees’ salaries and allowances would be raised 23.5 per cent and pensions only 24 per cent. The total financial impact on the government would be Rs 1.02 lakh crore for 2016-17.
Pankaj Murarka, equity head, Axis Mutual Fund, said, “Certainly, there will be a positive impact of the commission but it will not be as much as we had witnessed in 2009 during the sixth pay commission. Discretionary spending is likely to increase as salaries go up and sectors which will be benefited are largely automobiles, consumer durables, and housing finance.”
The BSE Auto index rallied 1.5 per cent. The BSE Consumer Discretionary Goods and Services and Consumer Durables indices gained 1.3 and 1.5 per cent, respectively. Titan, Whirlpool, Asian Paints, Ambuja Cements, and Colgate-Palmolive (India) gained between one and eight per cent each. Stocks such as Shoppers Stop, Jubilant FoodWorks, PVR got a push from the possibility of staying open for 24 hours. Realty stocks such as DLF, Sobha, Indiabulls Real Estate and Godrej Properties soared.
Bhat said, “Inflation risk is real; it can go up slightly. We would need to see how far the interest rates would be cut. Also, constant selling by FIIs (foreign institutional investors) is worrying.”
However, Holland believes inflation would also depend on monsoon rains. "Good monsoon rains can keep the prices in check. Also, a little bit of inflation is not bad," he added.
The mining exploration policy decision saw metal and mining stocks gain.
However, the BSE FMCG index ended flat, with a negative bias, down 0.1 per cent. FMCG is fast-moving consumer goods.
Global equities, alongside domestic boosters, supported the rally; they rose on revised annualised GDP (gross domestic product) data in the US, which showed growth at 1.1 per cent as against 0.8 per cent quoted previously.
Investors seem to have restored faith in central banks across the world to guide the world economy after the Brexit shocker. The Asian markets including Japan's Nikkei and China's Shanghai Composite closed one-two per cent higher while major European indices were rallying over two per cent each.
In the currency market, euro and pound, battered after Friday, are fighting back.
In the commodity space, Brent crude oil futures were up 49 cents to $49.07 a barrel.