Bulls charge: Markets rally nearly 2% in best session in six weeks

Tech, auto stocks make for a third of Sensex gains ahead of Q3 results

Indian equity benchmarks extended their gains to the second day of the new year, rising nearly 2 per cent on Thursday — the best single-day increase in six weeks — amid a surge in technology majors on the back of hopes of improved earnings in the third quarter.

 

Auto stocks that soared after robust December sales and gains in heavyweights, such as Reliance Industries and Bajaj Finance, along with buying by foreign portfolio investors (FPIs), also contributed to the rally.

 

The Sensex on Thursday ended the session at 79,943.71, a gain of 1,436 points or 1.83 per cent, while the Nifty closed at 24,189, up 446 points or 1.88 per cent. Both indices posted their best single-day gains since November 22 and outperformed their Asian peers. The total market capitalisation of BSE-listed firms rose by Rs 6 trillion to reach Rs 450 trillion.

 

 

Technology and auto stocks accounted for a third of the Sensex’s gains.

 

IT majors soared on hopes of a boost to the US economy and the rupee’s depreciation against the dollar, which is expected to benefit the sector, given that a major portion of its revenue comes from the US. The rupee had depreciated by 3 per cent against the dollar last year. 

 

The domestic passenger vehicle (PV) wholesales market in the Indian automobile industry rose by 11 per cent year-on-year (Y-o-Y) in December, driven by strong demand for sports utility vehicles (SUVs), a recovery in urban markets, and year-end discounts. Leading auto manufacturers reported robust December sales, with Mahindra & Mahindra’s overall auto sales growing by 16 per cent, Maruti Suzuki’s by 30 per cent, and Eicher Motors’ by 25 per cent.

 

“The auto sales numbers were better than expected, and there is a feeling that the earnings season may not be as weak as feared. NASDAQ futures were up during the day, which might have supported Indian IT stocks. And with Donald Trump’s inauguration nearing, expectations of an improvement in the US economy are rising, potentially benefiting Indian tech firms,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies.

 

FPIs, who purchased shares worth Rs 1,507 crore, turned net buyers on Thursday for the first time since December 13. Domestic institutions also bought shares worth Rs 22 crore.

 

Banking stocks increased following a research report by Jefferies, which suggested favourable risk-reward dynamics, reasonable valuations, and easing asset quality pressures.

 

Going forward, corporate results for the December quarter and the Union Budget will play a major role in determining market direction.

 

“Investors will closely track the pre-quarterly business updates to be released over the next few days for insights into the upcoming results season. We expect a gradual market uptick over the next few days, alongside close monitoring of Q3 earnings and global cues as foreign markets reopen after year-end holidays,” said Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services.

 

The market breadth was strong, with 2,339 stocks advancing and 1,635 declining. All Sensex stocks ended with gains. Infosys, up 4 per cent, was the biggest contributor to Sensex gains, followed by Reliance Industries, which rose 1.6 per cent after a report suggested the company has started the process for the initial public offering of its telecom arm.