Reduced chances of a US rate hike, coupled with foreign fund inflows and value buying, lifted the Indian equity markets on Friday.
Besides, healthy macro-economic data on foreign trade and positive Asian markets aided in the initial upward trajectory. However, a correction in the key European indices and the upcoming rate-setting meeting of the US Federal Reserve capped gains.
Both the key indices closed the day's trade with gains of around half a per cent each, as healthy buying was witnessed in automobile, oil and gas, and IT stocks.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) edged up by 37.30 points or 0.43 per cent to 8,779.85 points.
The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 28,520.30 points, closed at 28,599.03 points -- up 186.14 points or 0.66 per cent from its previous close at 28,412.89 points.
The Sensex touched a high of 28,778.64 points and a low of 28,494.59 points during the intra-day trade.
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In contrast, the BSE market breadth was marginally tilted in favour of the bears -- with 1,442 declines and 1,298 advances.
On Thursday, both the key Indian indices had closed on a flat-to-positive note, on the back of short covering, coupled with value buying at lower levels and inflow of foreign funds
The barometer index had risen by 40.66 points or 0.14 per cent, while the NSE Nifty edged up by 15.95 points or 0.18 per cent.
Initially on Friday, the benchmark indices opened in the green on the back of positive Asian markets.
The risk taking appetite of investors was enhanced as lower than expected economy data from the US reduced the risk of a rate hike.
The US Fed's FOMC (Federal Open Market Committee) will meet on September 20-21. A hike in US interest rates can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India.
It is also expected to dent business margins as access to capital from the US will become expensive.
Besides, investors' sentiments were buoyed by the Bank of England's decision to keep its policy rates and asset purchase unchanged. It also hinted at a further rate cut, if required.
In addition, domestic markets were lifted by positive macro-economic data released on Thursday, which showed that India's trade deficit declined sharply by 38.1 per cent to $7.67 billion in August 2016.
Moreover, foreign fund inflows and an appreciating rupee added to the upward trajectory.
The rupee strengthened by four paise to 66.98 against a US dollar from its previous close of 67.02.
However, gains were capped due to the weak start by key European markets and the delay in the timeline for recapitalisation of state-run banks due to budgetary allocation issues.
"Lessened chances of a US rate hike on the back of tepid data, positive Asian markets and return of the foreign fund inflows pushed the equity markets higher," Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS.
"However, a correction in the key European markets and the upcoming rate-setting meet of the US Fed capped gains."
According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, the CNX Nifty traded with volatile sentiments in the intraday session, and failed to sustain at higher levels due to profit booking.
"IT stocks traded volatile but managed to recover well in second half of the session. Banking and pharma stocks traded with mixed sentiments. Auto and oil-gas stocks also traded with mixed sentiments due to profit booking," Desai said.
"Power and FMCG stocks traded with mixed sentiments, while aviation stocks traded volatile due to profit booking but managed to recover well from day's low in second half of the session due to buying support at lower levels."
In terms of investments, provisional data with the exchanges showed that the foreign institutional investors (FIIs) purchased stocks worth Rs 660.59 crore, whereas the domestic institutional investors (DIIs) divested scrip worth Rs 213.13 crore.
Sector-wise, the S&P BSE automobile index gained by 128.98 points, followed by the oil and gas index, which edged up 124.66 points, and the IT index rose by 124.51 points.
On the other hand, the S&P BSE metal index plunged by 121.99 points, the basic materials index fell by 11.05 points, and the banking index inched down by 1.34 points.
Major Sensex gainers during Friday's trade were: Maruti Suzuki, up 2.25 per cent at Rs 5,565.95; Axis Bank, up 2.11 per cent at Rs 601.15; ITC, up 2.08 per cent at Rs 260.40; Infosys, up 1.82 per cent at Rs 1,060.35, and Hero MotoCorp, up 1.78 per cent at Rs 3,585.15.
Major Sensex losers were: Tata Steel, down 2.14 per cent at Rs 359.05; Tata Motors, down 1.50 per cent at Rs 548.90; Asian Paints, down 1.23 per cent at Rs 1,155.95; ICICI Bank, down 1.15 per cent at Rs 267.55; and HDFC, down 0.62 per cent at Rs 1,400.35.
--IANS
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