Stock markets rally as macro headwind eases, Sensex rises 260 points

The benchmark indices gained for a second day as investor sentiment improved following easing of the  macro headwind. The Sensex rose 262 points, or 0.8 per cent, to 34,925, while the Nifty 50 index rose 91 points, or 0.9 per cent to 10,605. A day earlier, both the indices had gained nearly one per cent each. A sharp recovery in the rupee, drop in oil prices and cooling off of bond yields eased inflation and fiscal deficit concerns. 

The rupee rose 0.84 per cent to 67.77 against the dollar and the yield on the 10-year government security dropped seven basis points to 7.79. Meanwhile, Brent crude oil prices dropped below $77 a barrel after climbing to $80 a barrel.

Oil prices cooled off on hopes that oil producing countries will boost their output to ease consumer anxiety.

"Some respite was seen in rupee and oil prices which helped the market to recoup its losses this week,” said Vinod Nair, head of research, Geojit Financial Services. 

The benchmark indices ended the week with marginal gains.

“Positive global cues uplifted domestic sentiment. Short covering was broad-based across sectors, while some buying interest was seen in mid- and small-cap stock,” Nair said.

The BSE Midcap index gained 1.55 per cent, while the BSE Smallcap index rose 1.2 per cent.

Overseas investors sold shares worth Rs 7.7 billion, while their domestic counterparts provided buying support to the tune of Rs 8.9 billion. Foreign portfolio investors (FPIs) have pulled out over $1 billion from the domestic market this month amid weakening of the rupee.

Globally, the US dollar has been gaining against most currencies. This, coupled with a further uptick in the US Treasury, has prompted investors to pull out from risky assets such as emerging markets. 

The Dollar Index, a gauge for the performance of the greenback against major global currencies, is currently hovering around a six-month high of 94. 

Beaten-down stocks led the rally. ONGC rose 4.6 per cent, Tata Steel added 3.4 per cent and YES Bank gained 2.7 per cent.

“Overall we remain bullish on the Indian markets and see buying opportunity in the consumption, private banking and auto space,” said Hemang Jani, head-advisory, Sharekhan by BNP Paribas.