Forecast spreads monsoon cheer among stocks

IMD on Tuesday said monsoon rains are expected to be above average in 2016, easing concerns over farm and economic growth after two straight droughts

The markets advanced for a second day on Tuesday, buoyed by a forecast of 'above normal' rain this year. Supportive global markets and gains in crude oil prices boosted investor optimism.

Agriculture-related stocks and those dependent on the rural economy led the gains.

The benchmark Sensex on the BSE gained 123.43 points or 0.5 per cent to 25,145.59. The National Stock Exchange's Nifty 50 ended at 7,708.95, up 37.55 points or 0.5 per cent.

India Meteorological Department (IMD) on Tuesday said monsoon rains were expected to be above average, easing concern over farm and economic growth after two straight droughts. A day earlier, private forecaster Skymet had a similar forecast.

“The market extended gains, led by strong expectation of a strong monsoon, coupled with a positive outlook on Consumer Price Index inflation. These factors will give needed support for a gradual pick-up in the domestic economy. Good buying interest was seen in mid-caps, followed by small-caps, showing signs of the comeback of retail (small) investors,” said Vinod Nair, head of research, Geojit BNP Paribas Financial Services.

Foreign investors bought shares worth Rs 308 crore, provisional data showed. The BSE Midcap and Smallcap indices gained nearly one per cent each.

Shares of fertiliser and seed companies saw a lot of buying interest. Insecticides (India) gained 16 per cent, Jain Irrigation Systems gained 6.1 per cent, Chambal Fertilisers added 4.1 per cent and Kaveri Seed rose 3.4 per cent.

"The market is taking the monsoon forecast news positively but the important trigger will be earnings reports and global cues," said Daljeet Singh Kohli, head of research at India Nivesh Securities.

As Wednesday will be the last trading session for the week, market players are bracing for a choppy session. “It’s going to be a volatile session on Wednesday, as the markets will first react to macro economic data in early trades. Besides, participants would make adjustment to their trading positions, keeping in mind the long weekend ahead and the results of information technology major Infosys (to come on Friday),” said Jayant Manglik, president, retail distribution, Religare Securities.