Sensex, Nifty post highest one-day gains since May 25

Stock indices rebound 20% from 2016 lows spurred by global markets

Benchmark indices on Monday rose about two per cent, picking up cues from the global markets, which were boosted by stronger-than-expected US monthly jobs data that improved the outlook for world economy.

The S&P BSE Sensex rallied 500 points, or 1.84 per cent, to end at 27,627, its highest close since August 19, 2015. The 50-share Nifty added 145 points, or 1.74 per cent, to settle at 8,468. Both indices posted their biggest single-day gain since May 25. Having rebounded around 20 per cent from their February lows, the Sensex and Nifty once again entered into bull territory amid good monsoon forecasts and early signs of recovery in corporate earnings.

US stocks rose, pushing the S&P 500 Index to an all-time high of 0.6 per cent, amid renewed optimism in the world’s largest economy. Japan’s Nikkei  gained four per cent after the ruling coalition won an election, stoking hopes for more fiscal stimulus. Most Asian and European markets rose over a per cent on Monday, while safe havens such as gold and yen tumbled.

Foreign institutional investors were net buyers to the tune of Rs 1,056 crore on Monday, according to data provided by exchanges. “The global markets have aided the rally. There is a risk-on-trade across the markets and India is participating in it,” said Andrew Holland, chief executive officer, Ambit Investment Advisors.

“The markets can gain another 5 to 10 per cent depending on how the earnings season and monsoon pan out,” he added.

Besides strong global markets, good progress of the monsoon and the likely passage of the goods and services tax (GST) Bill in the monsoon session of Parliament, which commences next week, also raised optimism.

“The rally is driven by strong monsoon data. Global factors too have provided good support. If the monsoon continues to remain strong, the bullish trend will continue,” said Dharmesh Mehta, managing director and chief executive officer, Axis Capital.

The broader markets also rallied on Monday, with the BSE mid-cap index gaining 1.5 per cent to reach a record high. The BSE small-cap index underperformed, gaining just 0.8 per cent. The overall market breadth was in favour of gains with 1,741 stocks advancing and 1,033 declining on the BSE. Domestic investors were net sellers to the tune of Rs 610 crore.

Among the Sensex components, Adani Ports gained the most at 4.8 per cent, followed by Tata Motors, which gained 4.2 per cent. ICICI Bank and State Bank of India added 3.4 per cent and 2.8 per cent, respectively.

Most sectoral indices gained between 1-2 per cent, with banking, auto and metal indices leading.

Investors will keenly watch the earnings season, which has just got underway, and the passage of the GST Bill.

“How the government goes ahead with reforms would be key. Eventually, the private sector will start participating in the economy. The real impact will be seen at the end of the year,” said Mehta.