Markets extend rally as worst GDP fears belied

The Indian benchmark indices registered gains for the second consecutive session on Tuesday on the back of positive global news flow, which fuelled market rallies across regions. The fact that India’s economy grew at a slightly better pace in June than predicted also acted as a catalyst for domestic indices.

The 30-share Sensex of the Bombay Stock Exchange (BSE) gained 1.59 per cent or 260 points to end at 16,677 — its best close in nearly two weeks. The broader Nifty of the National Stock Exchange (NSE) moved up 81.40 points or 1.65 per cent to close above the psychological mark of 5,000 at 5,001.

According to market experts, the trigger came in the form of US data suggesting consumer spending rebounded 0.8 per cent in July, after a 0.1 per cent dip in June, the fastest pace since February. The data was released by the US commerce department late on Monday.

"Risk tolerance seems to have improved in the past few sessions amid optimism the global economy will avoid another recession," said Amar Ambani, head (research), IIFL. The resolution of the political impasse over the Lok Pal Bill was another positive, he added.

However, not all market analysts agree risk aversion has subsided and the market is showing renewed resilience. "These are intermittent rallies that will not last long," said Dilip Bhat, joint managing director, Prabhudas Lilladher. "The underlying sentiment of the market is still bearish and further movement would depend on the RBI's policy review in mid-September," he said.

Incidentally, the Sensex has fallen 8.4 per cent in August, its second straight monthly drop and the biggest percentage decline since January. The index is down nearly 19 per cent this year.

Foreign institutional investors, which have been heavy sellers of Indian shares in the current calendar year, were net buyers of Rs 621 crore on Tuesday, according to provisional numbers. Domestic institutions bought shares worth Rs 102 crore.

Among index heavyweights, Reliance Industries was the biggest gainer, rising 3.7 per cent to Rs 782.60. Infosys gained two per cent to close at Rs 2,342.95 on account of encouraging US data.

Top mortgage lender HDFC's shares rose 2.7 per cent to Rs 662.65 and HDFC Bank ended 3.4 per cent higher at Rs 471.95.

State-run explorer ONGC dropped 4.2 per cent to Rs 263.30, as investors were disappointed after the company's board yesterday did not set a timeline for the launch of its follow-on share sale. The markets will be shut on Wednesday and Thursday on account of Eid and Ganesh Chaturthi holidays, respectively.