Markets rebound on Fed minutes, reforms push

Sensex, Nifty add 1.4%, most in nearly seven weeks

The Indian markets rallied on Thursday, along with other global markets, on bets that the US Federal Reserve would raise rates in December but further increases would be gradual. A slew of policy announcements by the government after Wednesday’s market close also boosted investor sentiment.

Recovering from a two-month low, the benchmark BSE Sensex ended at 25,841.92, up 359.4 points or 1.4 per cent, the biggest advance since October 5. The National Stock Exchange's Nifty rallied 110.95 points or 1.4 per cent, to 7,842.75. In the previous trading sessions, the indices had recorded their biggest single-day fall in nearly two months.

“The government’s intention to push for reforms just before the start of Parliament's winter session is being taken positively by the market. Additionally, the Fed minutes appear to indicate that the US rate hike will only be a gradual increase, which is positive for emerging markets, since they are under pressure due to foreign outflow,” said Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial Services.

Most Asian markets gained a little over one per cent, European markets traded that much higher, too, after the US market gained 1.5 per cent overnight. On Wednesday, issued minutes of the Fed meeting signalled a rate rise in December but emphasised that further increases would be gradual.

The NSE VIX Index, a gauge for market volatility, fell nearly nine per cent on Thursday, signalling that the positive sentiment might continue. “The market surprised with a complete U-turn after yesterday’s sell-off. Policy reforms announced by the government post market hours on Wednesday aided the recovery. Sentiment was also boosted by the Fed meeting minutes,” said Jayant Manglik, president, retail distribution, Religare Securities.

Foreign institutional investors (FIIs) continued to remain sellers but the intensity was less. On Thursday, they net-sold shares worth Rs 343 crore, provisional data showed. In the previous three trading sessions, FIIs sold an average of Rs 700 crore daily, extending their November selling tally to over Rs 4,500 crore.

The Indian market is down around three per cent in November and six per cent in 2015. Citi, in a report, attributed the lacklustre performance to delay in earnings growth, a capital expenditure revival and government reforms. The brokerage, however, remains positive on the Indian market and has set a target of 29,300 (15 per cent upside from current levels) for June 2016 at the Sensex and 32,000 (25 per cent upside) for December 2016. Its targets for the Nifty are 8,900 for June 2016 and 9,700 for December 2016.

The market breadth was fairly strong on Thursday, with almost two advancing stocks for every one declining. Almost all BSE sectoral indices ended with gains; those for information technology, oil & gas and consumer durables showed outperformance.  Among the Sensex components, Bajaj Auto, Vedanta and HDFC rose the highest, nearly three per cent each.

Aviation stocks, particularly, saw robust buying on Thursday. Jet Airways soared eight per cent, SpiceJet added nine per cent and the newly-listed IndiGo climbed nearly 10 per cent. Shares of IndiGo have gained about 50 per cent over its issue price in only seven trading sessions.