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India’s key stock indices surged nearly 2 per cent on Monday amid a broad-based rally led by capital goods and banks while firm global cues aided the northward move.
Though the stock markets had moved on a positive note early in the day, the major move came in the second half after the Reserve Bank of India relaxed provisioning norms against bad loans by allowing banks to set set aside up to 50 per cent of floating provisions from the existing 33 per cent.
This helped the benchmark indices snap an eight-day losing streak, with the BSE S&P Sensex gaining 517 points to close at 27,975.86 after crossing the 28,000 mark intra-day — its best gain since January 15. The CNX Nifty was up 150.90 points at 8,492.30.
The central bank’s new norms were a trigger for lenders. Shares of top lenders such as HDFC Bank and State Bank of India gained between 2 per cent and 2.4 per cent while those of ICICI Bank, Punjab National Bank and Bank of Baroda were up 1.3-1.9 per cent. Mid-sized private banks such as Kotak Mahindra, Federal Bank and YES Bank were up nearly a percentage point each.
“The markets took a U-turn today, on the back of strong buying in the frontline stocks. Short-sellers were forced to cover their shorts, which helped the markets to a certain extent. Global markets also being in the green helped the sentiment to improve,” said Alex Mathews, head research, Geojit BNP Paribas Financial Services, in a note after market hours.
Market experts say the upmove may extend into April. However, they caution that one needs to be selective and have a stock-specific approach ahead of the quarterly results season.
G Chokkalingam, founder and managing director, Equinomics Research & Advisory, says, "The markets have seen a healthy correction after the steep rise seen since the last year. For the past few weeks, we have seen a sell-off on account of not only global factors, but also some profit booking by investors ahead of the futures & options (F&O) expiry for the March series. Investors also sold to take advantage of tax benefits ahead of the financial year closing."
He further adds, "With these two events - the F&O expiry and the tax benefits owing to financial year closure behind us, I feel some rise seen on Monday has been has been on account of these investors returning to the market. I expect the markets to resume their up move in April."
Credit rating agency Moody's said in its latest Credit Outlook report released on Monday that the government's latest plan to revive the stranded gas-based power generation capacity through imports would help save $16 billion worth of investments and banks including IDBI, SBI and ICICI Bank were set to be the biggest beneficiaries of the plan.
Meanwhile, BSE S&P Small Cap index was the highest gainer with 3.4% while the Mid Cap index was up 1.93%. Among other sectoral indices, Capital Goods gained the most at 2.82% while Realty Index was up 2.2%.
