 "Markets rise on BoE stimulus")
The Indian markets on Friday posted their biggest single-day gain in almost a month, after the Bank of England’s (BoE’s) stimulus plan further boosted the risk appetite of global investors.
Most emerging markets (EMs) rallied after Britian's central bank on Thursday cut borrowing costs and announced a stimulus package aimed at protecting its economy from the Brexit (vote to leave the European Union) fallout.
The benchmark BSE Sensex on Friday ended at 28,078.35, up 363.98 points, or 1.3 per cent, the most since July 11. The Nifty 50 on the National Stock Exchange gained 132 points or 1.5 per cent to 8,683.15. Both indices had a consecutive weekly gain, amid sharp inflows from foreign investors.
The government’s plan to maintain the long-term inflation target at four per cent was also taken positively by the market. Shares of Axis Bank gained 3.6 per cent, State Bank of India added 3.2 per cent and ICICI Bank gained 2.3 per cent.
Shares of automobile companies continued to gain, boosted by the progress on the goods and services tax (GST). Hero MotoCorp gained five per cent, the highest among Sensex components. Bajaj Auto and Tata Motors gained 4.4 per cent and 3.2 per cent, respectively.
The broader market also saw sharp gains, with the mid-cap and small-cap indices outperforming the benchmarks. On the BSE, there were two advancing stocks for every one declining.
On Friday, both the foreign institutional investors (FIIs) and domestic institutional investors (DIIs) remained strong buyers. By provisional data, FIIs bought shares worth Rs 435 crore; their domestic counterparts were net buyers by Rs 616 crore. FIIs have been net buyers of Indian equities for almost a month, having poured a little over $2 billion (Rs 14,000 crore) in this period.
“It was a positive day on the bourses, as passage of the GST Bill got a thumbs-up from a global credit rating agency and a fresh round of liquidity easing in the UK lifted sentiment in global stock markets,” said Shreyash Devalkar, fund manager at BNP Paribas Mutual Fund.
Moody's Investor Service said passage of GST in the Rajya Sabha was a credit-positive for India’s sovereign and non-financial corporates.
The MSCI EM index, a gauge for the performance of emerging markets, gained around 0.7 per cent on Friday on the BoE move. BoE has cut its benchmark interest rate by 25 basis points to 0.25 per cent, the lowest in its 322-year history. It has also start a fresh round of quantitative easing, that had been on pause since 2012.
Dipen Shah, head of private client group research at Kotak Securities, said investors had celebrated the BoE’s rate cut and $132 billion stimulus package, and advised caution as valuations have become lofty.
“The recent rise in markets has resulted in valuations of benchmark indices moving up to the higher end of the long-term valuation band. One needs to be careful in picking stocks for investments and more due-diligence is needed before committing funds. The triggers to look forward to include the balance quarterly results and the Reserve Bank policy meeting. We expect status quo at the August 9 meeting,” he said.
