SENSEX RECORDS ITS BEST DAY IN FOUR MONTHS AS OIL PRICES DIP

BOUNCE BACK Stocks surge most in 4 months, tracking gains in Asian markets

MUMBAI:INDIAN shares rebounded on Tuesday after a sharp budgetday sell-off. Stocks surged the most in nearly four months, tracking gains in Asian markets, as crude oil prices slumped to the lowest level in 13 months.

BSE’S benchmark Sensex surged 917.07 points, or 2.3%, to 40,789.38. The broader 50-share Nifty advanced 2.32% to 11,979.65 points. With this, both the indexes have recouped losses incurred on the day finance minister Nirmala Sitharaman presented the Union budget.

Lower crude prices will benefit a range of industries that use oil and its derivatives, including airlines, consumer goods makers, vehicle manufacturers, and refineries. A lower oil import bill will also help create more fiscal space for the government to stimulate the economy.

MUMBAI: Indian shares surged on Tuesday after a sharp budget-day sell-off. Stocks rose the most in more than four months, tracking gains in Asian markets, as crude oil prices slumped to the lowest level in 13 months.

Lower crude prices will benefit a range of industries that use oil and its derivatives, including airlines, consumer goods makers, vehicle manufacturers, paint companies, and refineries. A lower oil import bill will also help create more fiscal space for the government to stimulate the economy.

BSE’S benchmark Sensex surged 917.07 points, or 2.3%, to 40,789.38. This is the biggest gain since 23 September 2019. The broader 50-share Nifty advanced 2.32% to 11,979.65 points. With this, both the indexes have recouped losses incurred on the day finance minister Nirmala Sitharaman presented the Union budget.

Asian markets gained, supporting Indian stocks. Shares in Japan, China, Hong Kong and Korea advanced as much as 2% after Monday’s record $720 billion wipeout in China because of fears related to the deadly coronavirus outbreak.

Investors are weighing China travel restrictions and business shutdowns alongside measures Beijing is introducing to support growth as the hit to its economy mounts.

Meanwhile, Hong Kong reported a death from the coronavirus, confirming the second fatality outside mainland China.

On Tuesday, crude prices hovered around $54 per barrel. Prices have fallen 20% in the past month, indicating oil could have slipped into bear market territory. Brent prices are down 17% this year.

“In best-case scenario, we see a slight reduction in global GDP in first half of 2020 from our previous outlook. In the worst case, we expect a recession. In the best-case scenario, global GDP sees reductions of 0.2% in Q1 and 0.15% in Q2, and China’s by 0.8% and 0.2%, respectively,” said Claudio Galimberti, head of demand, refining and agriculture analytics at S&P Global Platts.

In India, which imports more than 80% of its oil needs, low prices may give the government more room to announce reforms and manage the tight fiscal situation, analysts said.

“Lower crude prices are a big positive for Indian markets

while gains in other global markets boosted sentiment,” said Atul Bhole, vice president of investments, DSP Mutual Fund.

“After the sharp sell-off on budget, there is a realisation among investors that there was nothing negative in the proposals.”

As the government’s budget proposals didn’t bring in any material policy changes that significantly altered growth outlook, liquidity continued to chase Indian equities. On Monday, foreign institutional investors bought Indian shares worth $258.53 million. They are net buyers of shares worth $1.37 billion this year. Domestic institutional investors, including mutual funds and insurance companies, have bought a total of ₹3,572.82 crore in stocks in 2020. They bought ₹1,286.63 crore on Monday.

“We ascribe the fall of 3% in

Nifty on 1 February to high expectations of a growth-and investor-friendly budget and weakness in global markets. Our expectation of a slow recovery in growth, supported by ample liquidity and lower cost of fund remains,” Nomura said. The brokerage, however, thinks the budget announcements on personal income tax and dividend distribution tax could hit flows, persistency and value of new business margins for insurance firms.

With Indian equities trading at almost 19 times forward price-to-earnings, a 40% premium to MSCI Asia Pacific excluding Japan index, there is near-term downside risk to the markets, particularly in the light of rising coronavirus concerns, according to Goldman Sachs.

Bloomberg contributed to this story.