Expectations of a stimulus package and firm global equities pushed Indian markets sharply higher for the second day. The Sensex today climbed about 600 points to 37,981 today, led by banking stocks on hopes that the government may offer support and infuse some capital into the sector. The broader NSE Nifty 50 index rose 1.6% to 11,227.55. Sensex and Nifty had surged about 2% in the previous session.
The public sector bank index gained 3.3% and the banking index rose 3.3% after reports said that the finance ministry may provide capital support to some public sector banks in the third quarter.
Analysts also said investors were hoping for some support for banks over waiving interest rates on loans under a moratorium, after the government told Supreme Court that it was in its decision making process. The court will hear the case again on October 5.
“The markets kept the upward momentum on for the entire day. However, the level to watch out for is 11300-11350. We need to get past and close above that price zone. That would signal that an intermediate bottom has been made and we have entered into an uptrend. Until then, there is always a possibility of a U-turn from the current levels and the Nifty might attempt to go and test the 10750 levels,” said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.
Shares of multiplex operators PVR Ltd , INOX Leisure Ltd rose as much as 13.5% and 8.0%, respectively, after West Bengal allowed theatres to operate from next month.
In the Sensex pack, IndusInd Bank was the top gainer, soaring around 8 per cent, followed by Bajaj Finance, Axis Bank, PowerGrid, ONGC, ICICI Bank, Sun Pharma and M&M.
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“In continuation of Friday’s rebound, the benchmark made a gap-up opening and gradually inched higher the day progress. The recovery was broad-based wherein noticeable rebound was seen in auto, banking and financial stocks after investors’ hopes increased on the likely announcement of an additional stimulus package by the government,” said Ajit Mishra, VP – Research, Religare Broking Ltd.
“The rebound in global indices combined with the hopes of possible stimulus is helping the markets to recover. Further, unlocking 5.0 to bring relaxation to tourism, education, hotels and leisure segment including cinema halls would improve demand as well as investors’ sentiments. Having said that, traders should not go overboard and see how the Nifty index behaves around the critical hurdle of 11,300. We advise booking partial profit in trading positions around that zone and waiting for further clarity,” he said.
“Expectations of a stimulus coupled with capital Support to state run banks fuelled the rally in late afternoon trade. The postponement of the Supreme Court verdict by a couple of days provided a breather to the bulls as large caps led the charge,” said S Ranganathan, Head of Research at LKP Securities.
However, many analysts remained cautious. “Traders have come back on the long side hesitatingly; however lack of active selling helped indices to record sharp gains amidst lower than normal volumes. Nifty could now face resistance in the 11278-11322 band,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
Vinod Nair, Head of Research at Geojit Financial Services, said: “Global cues were also positive following positive industrial profits data from China, setting aside concerns about the increasing virus infections and related impact. Indian markets were also banking on further stimulus and other measures by the government to boost the economy. Traders limit overnight positions and keep booking profits while investors follow an accumulation strategy.”
