Sensex jumps 530 points to scale new high on hopes of more reforms

Benchmark indices posted their biggest single-day gain in a month on hopes that the government will announce measures to spur economic growth. Positive developments in the US-China trade tussle fueled gains in global equities and helped boost risk appetite. 

Market players said short-covering and sustained foreign flows ensured markets remained bullish. 

The benchmark Sensex rose 530 points, or 1.3 per cent, to end at 40,889, while the Nifty added 159 points, or 1.34 per cent, to end at 12,074, only 14 points shy of its previous 

all-time closing high on June 3. 

Most global markets advanced after China increased penalties on intellectual property violations, triggering hope that the world’s second-largest economy was keen on settling the trade dispute. 

“The prolonged trade war between the US and China has been weighing on domestic markets. Positive statements by officials suggest a trade pact is likely before the end of this year. This is a welcome development,” said Sandeep Nayak, chief executive officer, Centrum Broking.

“Cues that the US and China will conclude a deal by next month lifted sentiment across the globe,” added Vinod Nair, head of research, Geojit Financial Services.

Market players said hope  of the Centre continuing with measures to support growth helped investor sentiment. To boost corporate earnings and investments, the government on September 19 surprised the Street by lowering the corporation tax. Since then, the benchmark Sensex has gained more than 13 per cent.  

Government measures, coupled with easy monetary policy globally, have resulted in acceleration of foreign portfolio investor (FPI) flows into the domestic market.  

FPI flows have crossed an unprecedented $6 billion in the past two months. On Monday, FPIs bought shares worth Rs 961 crore, even as their domestic counterparts were net-sellers to the tune of Rs 214 crore. Experts said sharp foreign inflows have acted as a tailwind for the domestic market. “FIIs prefer emerging markets (EMs) such as India as the recent easy monetary stance of the US Federal Reserve and the European Central Bank has improved liquidity in world markets,” said Nayak.

On Monday, all Sensex components with the exception of YES Bank and ONGC ended with gains. Bharti Airtel rose the most at 7.2 per cent and made the second-biggest contribution to the index gain. HDFC rose 2.6 per cent and made the biggest contribution to Sensex gains. All the 19 sectoral indices indexes of the BSE advanced led by the index for telecom companies.

Market experts said buzz that the FTSE will increase India’s weightage in its global indices also helped investor sentiment. Last month, MSCI, another global index provider, had increased weightage in the MSCI EM index. Also, BSE’s decision to rejig the components of its premier Sensex index was welcomed by the market. “Reconstruction of Sensex indices and new developments over divestment to curb fiscal deficit provided confidence. Expectations of further cut in interest rate by the RBI, has boosted rate-sensitive stocks,” said Nair.