Sensex rises 7% in 3 days, grabs FII eyeballs

FII inflows of Rs 5,600 cr help markets post best 3-day rally since Sept 2013

Indian markets on Thursday gained for a third day, supported by global cues and foreign institutional investors (FIIs) amid recovery in oil prices.

The benchmark 30-share Sensex ended at 24,607, up 364 points, or 1.5 per cent, while the Nifty 50 added 107 points, or 1.45 per cent to settle at 7,475.6. The Sensex jumped seven per cent in three sessions.

Both indices have gained seven per cent in the past three sessions, in the best three-day rally since September 2013. Foreign investors have poured Rs 5,600 crore in Indian stocks in the past three sessions.

The sharp turnaround in the market comes after a dreadful February, where the Indian market was one of the worst-performing major global markets, correcting 10 per cent in dollar terms.

Most global markets have gained (not as much as India) in the past few sessions after positive US economic data and support from global central banks, particularly China's, improved risk appetite among global investors. Oil prices inched up from $35.1 per barrel to $37 a barrel in the past few trades.

The sustainability of the rally remains under threat after the five-day rally in European markets ran out of steam, oil prices corrected, and gold prices inched up after the Indian markets closed for trading on Thursday.

"Nifty upheld its positive tone for the third successive session. Favourable global cues and news of International Monetary Fund (IMF) projecting a robust growth rate for India, led to a surge on opening. And, FIIs alongside further strengthening in rupee, kept the momentum going," said Jayant Manglik, president, retail distribution, Religare Securities.

"After this vertical rise, we may see Nifty taking a pause on Friday. However, the bias would remain on the positive side."

FIIs on Thursday net bought shares worth over Rs 900 crore, while domestic investors were net sellers of Rs 465 crore, provisional data showed. Positive flows in the past three sessions have helped cut the year-to-date outflows to below $2 billion. Also, the gains in the past three sessions have seen the Indian market erase nearly half of the year-to-date losses. The Sensex is down only six per cent so far in 2016. The 30-share index now commands a multiple of 15 times its estimated 12-month earnings compared to 11.4 times for the MSCI Asia Pacific Index.

Market players say the recent gains are partially on global cues, while the fiscal prudence in the Budget has also helped.

"Pursuing the path of fiscal consolidation is good for India's macro stability: A key reason for India's outperformance since 2013. Bonds have rallied in response. There is boost to rural spending, which has been a drag on growth. The market appears to have support from sentiment and reasonable absolute valuations," said Morgan Stanley.

Thursday's rally was led by beaten-down metal and capital goods stocks. The biggest gainer among Sensex companies was Tata Steel, which rallied 7.3 per cent, extending this week's gain to 16 per cent. Other metal companies including Sail (Steel Authority of India Ltd) and Jindal Steel & Power gained five and 11 per cent, respectively.

Tata Motors, which soared 6.2 per cent to one-month high, was the second-biggest gainer, followed by Bhel (Bharat Heavy Electricals Ltd) and L&T (Larsen & Toubro), which added six per cent each.

Banking stocks were mixed on Thursday after sharp gains a day earlier. A survey by Bloomberg showed 12 of 16 economists expect the central bank of India to lower the benchmark rate by as much as 50 basis points before its scheduled meeting on April 5.