Shares rose for the second day in a row after the government almost doubled the price at which natural gas is to be sold to producers of power, steel and fertiliser, and fears eased about the US halting monetary stimulus.
The benchmark indices gained nearly 3% on Thursday, with the Sensex gaining 520 points to close at 19396 and the Nifty closing 160 points higher at 5842.
Reliance Industries (RIL) shares gained 3.8%, while those of Oil and Natural Gas Corp (ONGC) rose almost 3%.
Foreign institutional investors (FIIs), which were net sellers in the last 13 sessions, became net buyers on Friday. Net FII inflows were Rs 1,124 crore, according to provisional data put up on BSE.
“All the emerging markets and developed markets have bounced in the last two days. FIIs, who were on the sidelines, are jumping in and even local traders have become comfortable with the fresh policy thrust,” said Deepak Jasani, head of retail research at HDFC Securities.
The Cabinet approved the hike in gas price to $8.4 per million metric British thermal unit (mmBtu) from April 1 next year, as recommended by the Rangarajan committee.
The price currently ranges between $3.5 and $5.73 per million mmBtu.
The hike will greatly benefit RIL, ONGC and Oil India. But consumers will feel the pinch through higher power rates and farmers will have to pay more for urea.
CNG prices, too, will go up.
The markets also gained as the rupee retreated from record lows on Friday. The local currency gained 81 paise to close at 59.39 versus the dollar, according to Bloomberg data.
The rupee’s sudden fall had sent the markets into a tailspin, increasing fears on expensive imports and compressed margins.
“I don’t expect this market to take any bullish direction from here. For next 3-6 months, it will be range-bound unless more reforms are announced, and the government proactively clears infrastructure projects that are stuck,” said Manish Bandi, fund manager, India Infoline Asset Management.
HDFC’s Jasani couldn’t agree more.
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