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Indian markets posted their biggest single-day gain in three weeks, supported by positive global cues on hopes the US central bank might delay raising interest rates, as concerns related to the US economy remained.
Reversing three days of losses, the benchmark Sensex ended at 26,637.28 on Thursday, up 390.5 points, or 1.49 per cent, the most since September 18. The National Stock Exchange Nifty closed at 7,960.55, a rise of 117.85 points, or 1.5 per cent.
The gains were primarily led by banking, realty and capital goods blue-chip companies. Among the major gainers were Bharat Heavy ElectricalsLtd (BHEL) and Hindalco, which gained 8.4 per cent and six per cent, respectively. The BHEL stock posted its best gains in five months, after bagging an order of Rs 7,800 crore; Hindalco gained on news its China unit would start production ahead of schedule.
Members of the US Federal reserve’s Federal Open Market Committee said growth in the US “might be slower than expected if foreign economic growth came in weaker than anticipated”, according to minutes of the committee’s September 16-17 meeting, released on Wednesday.
“The Fed’s view to maintain low interest over a ‘considerable time’ was impressed on stone after the minutes of the September 17 meeting were released. The global confidence was lower (in the last few weeks), as risk remained high because the market was expecting higher interest,” said Vinod Nair, head (fundamental research), Geojit BNP Paribas Financial Services.
Prospects of an interest rate increase in the world’s largest economy have been spooking investors in the past few weeks. Foreign investors have pulled out about Rs 3,000 crore from Indian stocks in the past 10 trading sessions.
After selling stocks worth about Rs 1,000 crore on Wednesday, foreign institutional investors (FIIs) were net sellers by a marginal Rs 20 crore on Thursday.
Domestic institutional investors invested about Rs 600 crore in stocks, provisional data from stock exchanges showed.
Following the recent selling, the investment by FIIs so far this year stands at about $14 billion.
Owing to robust inflows, the Sensex has provided returns of about 26 per cent so far this year, the most among major world markets. The Indian market’s one-year forward valuations have move past their long-term historical averages.
Experts believe the market will take cues from companies’ earnings announcements for the September quarter. Information technology services major Infosys will kick-start the results season on Friday.
Analysts say to justify the high valuations, earnings will have to show an improvement. Jyotivardhan Jaipuria, head of research, Bank of America Merrill Lynch, feels major downgrades might be past and from next year, stocks will see upgrades. “Near term, we think Sensex earnings growth might aggregate 15 per cent for FY15, marginally lower than our current bottom-up number of 18.5 per cent. Over the longer term, we expect earnings and markets to double in four years,” he said.
