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Snapping previous session's losses, the market rebounded in trade on Thursday in a remarkable snapback from the shock of Republican Donald Trump's presidential victory in US. The expected long-term positive impact of demonetisation of Rs 500 and Rs 1000 currency notes also boosted investor sentiment.
The S&P BSE Sensex settled the day at 27,517, up 265.15 points, while the broader Nifty closed at 8,525, up 93.75 points. In intraday deals, the 30-share index rose as much as 490 points, while 50-share index reached 8,598.
"Investors have witnessed unprecedented large events - Indian currency demonetization and the unanticipated victory of Mr Trump. Both these events may lead to big implications, we therefore think to let things settle down and hopefully by than we will have more answers than questions," Sachin Shah, Fund Manager, Emkay Investment Managers Limited said.
"The eradication of black money menace from the Indian economy is a big positive in the long-term and the Indian economy will be on a very strong footing once the short-term teething problems are done with," he added.
We have compiled five reasons that may have pushed market higher in today's trade:
1) Global markets
Domestic markets rose tracking gains in Asian shares and Wall Street after global investors turned hopeful about generous tax cuts and higher infrastructure and defence spending in the US following Donald Trump's victory. The Nikkei emerged strongest, jumping 7% at one point after sinking 5% on Wednesday. China's Shanghai Composite gained 1.37%, while Hong Kong's Hang Seng added 1.89 per cent.
2) Value-buying
The investors lapped up the opportunity to add stocks at lower levels after Wednesday's fall. Experts believe the fall was largely on account of global cues while the structured story for India still remains intact.
3) Trump's speech soothe investors' nerves
The first speech by President-elect Trump soothed market investors as he appeared calm and composed in a surprising departure from his loud and flamboyant appearances during election campaigns. Trump praised Democrat nominee Hillary Clinton and urged Americans to "come together as one united people" after a deeply divisive campaign.
"That the reaction seen thus far appears to have been much more tempered is probably due to the emollient and conciliatory nature of Trump's acceptance speech, and the fact that there was always that nagging doubt that the pollsters may well be wrong," told Michael Hewson, chief markets analyst at CMC Markets to PTI.
4) Demonitisation long-term positive
Market may have reacted negatively in the Wednesday's trade following PM Narendra Modi's move to scrap the Rs 500 and Rs 1000 notes from circulation, most of stocks recovered in today's session. Realty index, which had fallen over 13 per cent on Wednesday, surged over 9 per cent, led by gains in DLF and HDIL.
"Government has clamped down on the prevailing black money issue by imposing a ban on the existing Rs 500 and Rs 1000 currency notes. Even as this step may impact the near-term GDP numbers because of a possible slowdown in economic activity, the longer term impact will be significantly positive. A large part of the parallel economy is likely to flow in to the formal system, which in turn will boost the GDP," said Kalmesh Rao, CEO, Kotak Securities.
5) Gains in metals and banking stocks
Metal stocks hogged the limelight with BSE Metal index being the top sectoral gainer (6%) led by gains in Jindal Steel, Tata Steel and Hindalco. The surge comes after Donald Trump said in his victory speech that he would embark on a project to rebuild infrastructure in the US.
"Pharma stocks continue to ride on expectations of favourable run under Trump’s regime, while the the infrastructural push expected from Trump also looks to have made bullish case for industrial metals," said Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services
Banking stocks also gained as banks' coffers are expected to swell when people tender their old notes while cost of deposits will be lower. The S&P BSE PSU index hit its 52-week high at 8077.73, but settled the day at 8044.62, up 4.13%.
"Meanwhile, as banking activities resumed, and disbursal of new currencies started, banking stocks also surged, with the increased footfalls in branches raising the possibility of rising deposits and transactions going forward, which augurs well for the banking sector, notwithstanding the potential easing of strain on the banking system, that PM’s demonetisation drive could bring about." he added.
"Pharma stocks continue to ride on expectations of favourable run under Trump’s regime, while the the infrastructural push expected from Trump also looks to have made bullish case for industrial metals," said Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services
Banking stocks also gained as banks' coffers are expected to swell when people tender their old notes while cost of deposits will be lower. The S&P BSE PSU index hit its 52-week high at 8077.73, but settled the day at 8044.62, up 4.13%.
"Meanwhile, as banking activities resumed, and disbursal of new currencies started, banking stocks also surged, with the increased footfalls in branches raising the possibility of rising deposits and transactions going forward, which augurs well for the banking sector, notwithstanding the potential easing of strain on the banking system, that PM’s demonetisation drive could bring about." he added.
