 "Sensex rises most in three months")
The markets posted their biggest one-day gain since March 1, to end Wednesday two per cent higher, buoyed by an above-normal monsoon forecast and rally in global peers. Sentiments got further support after Morgan Stanley upgraded its India outlook from “equal weight” to “overweight”.
The BSE Sensex closed at a one-month high as it gained 576 points to end at 25,881. The Nifty50 benchmark on the NSE climbed 186 points to close at 7,935.
Skymet, a private weather forecaster, has predicted rainfall at 109 per cent of the long-period average, as against 105 per cent predicted earlier. After consecutive drought years, abundant rainfall is crucial, as it boosts rural demand and helps keep inflation in check.
Motilal Oswal, chairman, Motilal Oswal Financial Services, said: “Rain will play a big sentiment value. There is plenty of money waiting to see the markets crossing the 8,000-mark. Once this occurs, we will see the broad markets moving much more aggressively.”
The stocks of consumer goods companies jumped across the board. Hindustan Unilever, Godrej Consumer and Hero MotoCorp gained one to four per cent each. Agriculture-related stocks also gained, with Jain Irrigation, Rallis India and Monsanto India up by one to three per cent.
Rate-sensitives were the largest gainers, led by hope of a recovery in the economy and rural India.
The rise in global peers also supported the rally in domestic markets. The US home sales data for April has also underlined the fact that the world’s biggest economy was on a path of revival. This data could also support the US Federal Reserve’s case for an interest rate hike in June. While this should make equities less favourable, experts say the market has already discounted for this. And, that the global rally was supported by receding fears of a British exit from the European Union.
Added Saurabh Mukherjea, chief executive, institutional equities, Ambit Capital: “The gain in commodity prices has increased investors’ appetite.”
The dollar hit a two-month high on the higher prospect of a rate hike. A stronger US economy also boosts demand for crude oil consumption.
Brent crude nudged up near $50/barrel and was quoting at $49.19.
Gold hit a six-week low, following strong global cues and an indication of higher risk appetite or lower demand for safe havens.
“The fact that oil is returning to $50 per barrel has bought a degree of confidence with it. Equity and commodity markets have rallied post the return of commodity prices,” said Mukherjea.
Jayant Manglik, president, retail distribution, Religare Securities, says: “It was an exceptional day for the equity markets, as the Nifty gained about two and a half per cent and closed around the day’s high. Initially, firm global cues gave a strong gap-up start, expedited with short covering in the index majors as the session progressed. Following the benchmark index, recovery was witnessed across the board, wherein banking, financial services and information technology sectors topped the gainers’ list.”
Among individual stocks, Bajaj Auto jumped five per cent on the BSE after the company reported a 29 per cent year-on-year jump in net profit at Rs 803 crore for the quarter ended March. Bhrat Heavy Electricals gained almost four per cent, after the company commissioned the first 800-Mw super-critical thermal unit in Raichur, Karnataka.
Cipla was the lone loser among Sensex companies in Wednesday’s trade. The stock declined five per cent, after the company reported a 69 per cent y-o-y drop in net profit to Rs 81 crore in the quarter ended March, on account of one-off expenses related to inventory reduction and closure of business in some small-size foreign markets. The results were declared on Tuesday evening.
Oswal said, “Expectation investing suggests that most negative catalysts seem priced in and markets are ready for the big move. Some of the positives we see from here onwards are a further cut in interest rates and corporate earnings beating the Street in the next few quarters.”
Mukherjeea, however, advised caution, saying: “The economy is weak and earnings are not going anywhere.”
