The equity markets continued their dream run on Tuesday with the benchmark indices surging the highest in over four years on heavy institutional buying in frontline stocks.
A variety of factors perked up market sentiment, improving foreign investors’ view of Indian markets. Foremost is the rupee’s strong recovery on the back of the central bank’s measures last week.
Then, there was positive news that India’s trade deficit situation and car sales have improved in August. Easing global tensions due to brightening prospects for a non-military solution to the Syrian crisis, and improving China economic data were a big help too.
The benchmark Sensex rose 3.77% or 727.04 points, its biggest daily gain in percentage terms since May 27, 2009, when the index had risen 3.83%. The NSE Nifty, too, gained 3.81% or 216.35 points to close at 5896.75.
The reversal in the fortunes of the rupee – the currency had touched its lifetime low of 68.85 to the dollar on August 28 but recouped nearly 7.3%, or by Rs 5, in the last eight sessions – has helped the Sensex to regain 2000.95 points since the rupee’s low, and it closed Tuesday at 19997.10.
Sakthi Siva, head of Asia Pacific and global emerging markets equity strategy, Credit Suisse, believes that signs of economic growth revival may well be fuelling the current rally in global indices.
“We had earlier suggested the potential for a 2H (second half) rally in 2013 like that seen in 2H 2010 and 2H 2012. While we certainly concede that a key difference in 2013 is QE (quantitative easing) tapering versus QE 2 in 2010 and QE 3 in 2012, we believe a key similarity is a bottoming in global growth momentum.
Indeed, data over the past week, including the US ISM’s (Institute for Supply Management) and China PMI (purchasing managers’ index), further support this call,” she wrote in a note on Tuesday.
The foreign institutional investors (FIIs) on Tuesday continued their buying streak for the fourth consecutive day pumping Rs 2,563.60 crore after having purchased shares worth over Rs 2,000 crore in the previous three sessions.
This is the biggest daily FII inflow in three-and-a-half months. The foreign investors would have gained 19.8% in the last eight sessions on the back of simultaneous rise in equities and the rupee.
The market breadth was quite positive with only one out of three stocks listed on BSE ending in the red. The banking sector again led the gains with a 2.89% rise; the capital goods, oil and gas and PSU indices, too, rose over 2%.
Auto stocks like Tata Motors (up 9.88%) and Hero Motocorp (up 7.22%) were among the biggest gainers. Other gainers were Bharti Airtel (up 8.15%), L&T (7.11%), HDFC (6.16%), ITC (6.07%) and Hindustan Unilever (6.04%).