MARKETS SNAP LOSING STREAK, RISE NEARLY 2%

MUMBAI: Investors on Wednesday cheered the government’s decision to raise dearness allowance (DA) in the middle of the festival season, driving Indian markets up nearly 2% in a rally led by financial sector stocks.

The benchmark 30-share BSE Sensex closed 1.72% or 645.97 points higher at 38,177.95, while the 50-share Nifty closed at 11,313.30, up 186.90 points or 1.68%.

The five percentage point increase in DA to 17% will put more money in the hands of at least 5 million government employees and 6.5 million pensioners. The hike, which will cost the exchequer ₹16,000 crore, will be effective from July.

Deepak Jasani, head of retail research at HDFC Securities Ltd, attributed Wednesday’s rebound to bargain hunting as well, coming after six straight days of losses.

“Sentiments also turned positive after the government hiked dearness allowance. Most emerging market stocks were headed lower for a third day on Wednesday as the US and China showed little signs of backing off from their trade dispute ahead of a crucial round of negotiations. However, later, European shares moved sharply higher and the Chinese currency in the offshore market jumped on Wednesday after a Bloomberg report said China was still open to agreeing a partial trade deal with the United States,” he said.

The Bankex rose 3.67%, with State Bank of India, ICICI Bank, HDFC Bank and Kotak Mahindra Bank rising 3-5%.

According to Vinod Nair, head of research at Geojit Financial Services, banking stocks rallied on hopes of greater liquidity and consumption, as the plunge in bond yields indicates further room for rate cuts.