Global rally lifts battered Sensex

Benchmark indices gain about 1.8%, most in 20 months

The Indian benchmark indices posted their biggest single-day gain in over 20 months amid a sharp rally in global markets on the back of positive US economic data. The Sensex gained 610 points, or 1.83 per cent, to close at 33,917 — the highest gain since July 11, 2016. The Nifty 50 index gained 194.5 points, or 1.9 per cent, to close at 10,421, its biggest single-day gain since May 25, 2016.

The broader markets, too, remained positive with the BSE mid- and small-cap indices gaining 0.76 per cent and 0.56 per cent, respectively. The overall breadth of the market, however, remained mixed as shares of 1,367 companies advanced while those of 1,346 others declined. The combined market capitalisation of all BSE listed companies was up by ~1.78 trillion

On Monday, foreign portfolio investors (FPIs) purchased shares worth ~3.75 billion and domestic institutions sold shares worth ~4.65 billion. The India VIX, a gauge of market volatility, fell 0.2 per cent to close at 14.5.

The rally was triggered by positive US jobs data released on Friday. According to the data, the US added 313,000 jobs in February against a forecast of 200,000. The data stoked economic optimism and helped the Dow Jones index add 1.7 per cent on Friday. All Asian markets gained in the range of 1.5-2.5 per cent and major European markets opened over 1 per cent higher on Monday.

These gains provided relief to the Indian markets since the Sensex had declined by over 1,400 points, or 4 per cent, after seven days of continuous declines between February 26 and March 7. The index has recovered by 900 points in two of the last three sessions.

Market experts said apart from strong global cues, gains were fuelled by short-covering but the markets were still not out of the woods and volatility could persist.

“Monday’s rally was more on account of positive US jobs data. This does not change the state our market is currently in. State-owned banks continue to reel from the pressure of bad loans and the final extent of the loss in the recent Punjab National Bank (PNB) fraud is still unknown. Global commodity prices are increasing fast, which is disadvantageous for India. Also, concerns over the safeguard duties imposed by the US have subsided for now but could resurface anytime,” said Andrew Holland, chief executive officer, Avendus Capital Alternate Strategies.

Five index heavyweights — ITC, HDFC, Reliance Industries, ICICI Bank and Infosys — contributed to half of the gains made by the Sensex. The shares of Bharti Airtel gained the most during the trading session and were up by 4.7 per cent. The shares of NTPC and ITC gained 4 per cent each. On the other hand, Coal India fell 2.26 per cent and was the biggest loser in the index.

The Indian markets have been under pressure since February 1 amid rising bond yields in the US and the PNB fraud.

“Domestic markets could come under pressure due to the confluence of multiple short-term negatives. These include a de-rating of earnings multiples due to the long-term capital gains (LTCG) tax, a spike in bond yields, slower-than-expected pick-up in earnings, and tapering emerging market inflows,” said Sahil Kapoor, chief market strategist, Edelweiss Financial Services.

Kapoor, however, said the longterm picture continued to look positive and investors should use the correction as an opportunity to buy shares of companies with sustainable business models.