MUMBAI: Indian stock indices snapped their three-session losing streak on Friday to end at a gain of 1% as global markets rose and investors bought into banking, energy and auto stocks on hopes of a turnaround and relief measures from the government.
The BSE Sensex rose 411 points, or 1%, to close at 41,575.14 and the NSE Nifty was up about 119 points, or 1%, to close at 12,245.80. Axis Bank emerged as the top Sensex gainer with a 3% gain followed by Power Grid Corporation of India, State Bank of India, ICICI Bank, Bharti Airtel and Reliance Industries with gains of 1.7-2.3%. Foreign portfolio investors purchased local shares worth Rs 81.4 crore on Friday while domestic institutional investors bought local shares worth nearly Rs 126 crore.
The PSU Bank index led the rally with a 3% gain. State-owned lenders surged ahead of a meeting between the Finance Minister and chiefs of public sector banks on Saturday with the market expecting some announcement regarding new measures to revive lending and boost credit flow to non-bank lenders. Investors also expect public sector lenders to gain from lower yields on government bonds after the RBI on Thursday announced the second tranche of ‘Operation Twist’ worth ?10,000 crore.
Whether the gains in the market sustain will depend on expectations surrounding the union budget on February 1.
“We are not expecting major buying ahead of the budget and see the Nifty trading in the 12,000-12,300 range,” said Shiv Diwan, co-head, Edelweiss Institutional Equities. “The market is already a tad expensive and measures to boost growth are needed for the broader market to pick up,” said Diwan.
MSCI India is trading at 21.8 times one-year forward earnings while the MSCI Emerging Market index is at14.6 times. Indian markets have gained 1.6-1.9% so far in December after the US-China trade tensions eased and UK’s pro-Brexit conservative party won the elections. The two events have helped sentiment and flows into emerging markets, including India, where local news flow on the economy have been weak. So far this year, FPIs have pumped in money in excess of Rs 1 lakh crore — the highest annual inflow since 2013.
The union budget will be the key focus in the first few weeks of the year besides the US Federal Reserve monetary policy meeting. On the budget front, whether the government eases fiscal deficit target will be closely watched and whether it announces a cut in personal income tax rates.
“The government seems to have exhausted pretty much every weapon it had from an economic and social perspective. In light of the successive state election defeats, it seems only logical that the much talked about relief of personal income tax could become a reality in Budget 2020,” said Rahul Arora, CEO, institutional equities, Nirmal Bang.
“Anything consumption driven, retail private sector banks, consumer staples, durables, electricals and auto stocks could do very well in the run-up to and just post the budget. It would not surprise me to see the Nifty at 13,000 just before or just after the budget and that could be a multi-year top for the market,” said Arora.
Rohit Srivastava, founder, Indiacharts.com, expects the Nifty to touch 12,600 in the weeks ahead of the budget. “The market trend is looking bullish as the index is forming higher top-higher bottom trending pattern on charts, which suggests the bullish sentiment should continue for a while,” said Srivastava.
Source: Economic Times