NEW DELHI: A sharp rally in shares of oil refiner , an overnight rally in US stocks, rare buying by foreign portfolio investors, slight weakness in the dollar and the overall positive sentiment across Asia lifted stocks on Wednesday morning.
The BSE market capitalisation jumped Rs 2.29 lakh crore to Rs 258.84 lakh crore from Rs 256.54 lakh crore in the previous session, as seven of every 10 BSE stocks rose and some 150-odd stocks hit their upper circuit limits.
Here are a few reasons behind Wednesday’s strong gains:
up on cut in windwall tax
The most-valued stock on Dalal Street, Industries, rallied on Wednesday morning after the government cut the windfall tax on diesel and aviation fuel shipments by Rs 2 a litre, and scrapped completely a Rs 6-per litre levy on gasoline exports. The government also cut the tax on domestically produced crude by 27 per cent to Rs 17,000 per tonne. Morgan Stanley said Reliance and other refiners will see a reduction in overhang and equity valuations and should start pricing in high sustainable energy margins as the government intent gets clear. Reliance alone contributed 165 points positively to Sensex’s 650 points rise.
Wall Street rallies overnight
Wall Street saw its best day in more than three weeks, as many companies reported better-than-expected corporate earnings. The Dow Jones Industrial Average climbed 754.44 points, or 2.43 per cent, to settle at 31,827.05. The S&P500 gained 105.72 points, or 2.76 per cent, to 3,936.57. The Nasdaq Composite index soared 353.10 points, or 3.11 per cent, to 11,713.15. A sharp rise in US stocks amid pick-up in US earnings has triggered a relief rally of late, easing some concerns over aggressive Fed rate hikes and recession in the US economy.
Provisional data showed foreign portfolio investors (FPIs) were turned buyers of domestic stocks on Tuesday to the tune of Rs 976.4 crore. Foreign investors have started buying domestic equities of late, which has restricted their total equity outflows to Rs 8,847 crore so far in July, as per NSDL compared with Rs 5,0203 crore outflows in June, Rs 39,993 crore ouflows in May and Rs 17,144 crore outflows in April.
“FPI selling appears to have bottomed out. FPIs have bought 5 days this month. The dollar index declining to 106.6 from above 108 is likely to persuade FPIs to buy rather than sell,” said V K Vijayakumar, Chief Investment Strategist at .
The US dollar fell on Wednesday as the euro extended its overnight bounce on relief that Europe might be able to avoid the worst fears concerning energy shortages, and on the chance, that the European Central Bank might deliver a more aggressive rate hike, Reuters reported. The dollar index, which tracks the movement of the dollar against a basket of six major world currencies, edged 0.14 per cent to 106.53.
The partially convertible rupee was trading at 79.96 per dollar, little changed from its close of 79.94 on Tuesday, when it had hit a record low of 80.0650.
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