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Sensex jumps 350 pts: Stimulus, rate cut hopes among 5 factors driving rally

Benchmark equity indices Sensex and Nifty extended their gains into the third straight session on Monday amid brisk buying in index heavyweights on firm global cues. The 30-share Sensex gained over 350 points to trade at 37,719, while 50-share Nifty topped the 11,100 mark.

Going by the buzz on Dalal Street, here are the key factors that fuelled the rally in domestic stocks.

More rate cut ahead
Market sentiment got a boost after Fitch Solutions said that the Reserve Bank of India (RBI) is expected to cut interest rates by 40 basis points before the end of this financial year as monetary easing till now appears to be insufficient in boosting economic growth. RBI Governor Shaktikanta Das on Monday said growth has become the highest priority for the monetary policy committee (MPC) of the central bank, adding credence to these projections.

Stimulus talks on
Finance Minister Nirmala Sitharaman on Friday said her officials are still in discussion with their counterparts in the PMO and the government would figure out what remedial steps should be taken and announce the same once the talks get over. There are expectations that Modi government would come out with a stimulus package to give boost to trade and industry. Industry has for long been seeking some stimulus in the form of a GST reduction across sectors, as auto sales have hit a 19-year-low in July plunging over 31 per cent and even consumer staples are facing the heat. Industry also wants rollback of some of Budget measures like the income-tax surcharge on the super-rich which is hurting FPIs.

Firm global cues
Most Asian markets traded higher on account of fresh hopes of trade negotiations between the US and China, and as US President Donald Trump dismissed worries about a recession in the US and claimed the economy remained strong. Hang Seng, Nikkei and Shanghai jumped up to 2.50 per cent.

RBI Governor’s speech
Markets also got some push after RBI Governor Shaktikanta Das said banking reforms are a continuous process and it will be the endeavour of RBI to see to it that there is no collapse of any large NBFCs. He said liquidity in the system has been in surplus since June 1 and promised to ensure adequate liquidity to meet productive needs.

Stock-specific development
In stock-specific developments, shares of Sun Pharma and Bharti Airtel gained up to 3 per cent in afternoon trade. Drug major Sun Pharma rallied after the company said one of its arms has granted an exclusive licence to a subsidiary of China Medical System Holdings (CMS) to develop and commercialise seven generic products in mainland China, while Bharti Airtel gained on buzz of a deal with Uttar Pradesh government.

Source: Economic Times