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Holidaying bulls return, lift Sensex 380 points

Bank stocks lead rally

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Spurt in bank stocks on hopes that ongoing bankers' conclave in Pune could churn out something positive for the banking sector and jump in domestic manufacturing helped bulls gain momentum on Dalal Street.

The last day of the New Year week ended with huge gains, with Sensex moving up 380.36 points, or 1.4%, to close at 27887.90. The Nifty rose 111.45 points, or 1.3%, to close at 8395.45.

According to Kunj Bansal, CIO & ED at Centrum Wealth Management, "The two-day bankers' conclave 'Gyan Sangam' has improved the market sentiments in anticipation of some major announcements by the government."

The bank index was one of the biggest gainers in Nifty with an increase of 1.6%. Also, the net FII inflows of Rs 260 crore led to a positive spike in the market.

The HSBC Purchasing Managers' index hit a two year high, climbing to 54.5 in December.

About 1,784 stocks have moved up on Friday while 1,160 shares declined, and 709 shares remained unchanged from their previous day's close.

In the near term, the quarterly corporate results and the global volatility are the main triggers driving the bourses.

Amar Ambani, head of research at IIFL, said, "The New Year has indeed brought good tidings for the market, especially for India as indices managed to stage a smart upmove despite lacklustre cues. Positive economic data and hopes of reforms in the banking sector provided the boost."

Markets ended the truncated week with gains of about 2% on benchmark indices amid low volumes. Indian markets were one of the best-performing markets globally in calendar 2014 with returns of 30%. Also, the current valuations of benchmarks at 15.5x one-year forward consensus earnings (FY16) are near the long-term average.

Dipen Shah, head of private client group research, Kotak Securities, said in a statement, ''In the medium- to long-term the government action on getting reform on track and as well as the potential decline in interest rates are likely factors which could lead to a further re-rating. Sustained low crude prices will be a cushion, though we need to watch out for increased competition from imports."

For the long term, Saurabh Mukherjea, head of equities at Ambit Capital, continues to have a target of 30,000 for this fiscal and 36000 for the next for the Sensex.

He believes that typically in the wake of a decisive election result, Indian economy tends to go through a cyclical recovery.

"During such a period, Sensex gives a return of 35% per annum for a period of three to four years, and we are in a midst of such a recovery."

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