On May 18, 2009, Sensex closed 2,110.8 points higher than its previous close, while Nifty ended 651.50 points higher than its previous session.
Bulls took over the domestic equity market as Finance Minister Nirmala Sitharaman slashed the tax rate for domestic companies. As a slew of "big bang" measures was announced, the S&P BSE Sensex logged biggest single-day gain in a decade, while NSE Nifty 50 recorded second-highest rise in history.
On May 18, 2009, Sensex closed 2,110.8 points higher than its previous close, while Nifty ended 651.50 points higher than its previous session.
The Sensex soared 2284.55 points to an intraday high of 38,378.02, before closing 1921.15 points, or 5.32% higher at 38,014.62. The broader Nifty jumped 677.10 points to a peak of 11,381.90 before settling 569.40 points, or 5.32% higher at 11,274.20. The new highs got investors richer by Rs 6.82 lakh crore. This also gave rupee a big boost and USD/INR spot dropped to 70.67.
Analysts termed Friday's announcement by Nirmala Sitharaman a pre-Diwali gift to the corporate sector. "The government has rolled out a red carpet that would ensure hundreds of billions of dollars of FDI & FII flows over the medium term," Ajay Bodke, CEO — PMS, Prabhudas Lilladher said told DNA.
"It is in a true sense an early arrival of festival of lights (Diwali) and banishment of long period of darkness & gloom bothering the Indian economy." He added that equity markets would rejoice as the "multi-year cycle of earnings downgrade" will finally come to an end.
"A significant valuation re-rating will follow as the market would start building in a virtuous cycle of an upgrade in earnings trajectory over the medium-term due to both tax savings & boost in revenues due to perk-up in aggregate demand. The engine of domestic consumption will fire first followed by the investment engine on the back of corporate regaining their mojo," he added.
"Markets have totally taken it as something which has turned the table for medium to long term," said Mustafa Nadeem, CEO, Epic Research, "Today's reaction is totally out of surprise and it will be acting as strong support for the coming weeks and months. The level 10,700-10,800 is now set to be a strong base for Nifty and we may see continuity in positive momentum on any dips from here on."
However, concerns about fiscal deficit loom large.
"The bond market did not take the fiscal announcement very well," Rahul Gupta, currency research head, Emkay Global Financial Services, said. "Also, the Finance Minister was unable to justify the fiscal concerns, thus the 10-year-yield surged nearly 25 bps keeping rupee gains under check. Thus, unless USD/INR spot doesn't end below 70.80, we expect prices to bounce 71.50 in next week."
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