Sensex rises 292 points, Nifty ends at 11,428 on optimism of US-China pact

The benchmark indices rose on Tuesday as investor sentiment improved due to optimism over US-China trade talks. Also, expectations that the festive season will improve consumer demand spurred buying in banking and automobile stocks.

After rising as much as 420 points, the Sensex ended Tuesday’s session 292 points, or 0.76 per cent, higher at 38,506, while the Nifty  ended at 11,428, an increase of 87 points, or 0.77 per cent.

This was the third straight day of gain for the both indices. Also, foreign portfolio investors (FPIs) were net-buyers for a second straight session. On Tuesday, the bought shares worth Rs 436 crore. Market players said the foreign flows are showing signs of improvement as the trade tensions are showing signs of abating.

“Green shoots from US-China trade talks added to the positivity. The outperformance in the domestic auto stocks was on expectation of festival demand,” said Vinod Nair, head of research, Geojit Financial Services.

Optimism that companies will deliver better quarterly earnings due to corporation tax cuts also enthused investors. Analysts said the government’s decision to hike the dearness allowance by 5 per cent, from 12 per cent to 17 per cent, will positively impact the demand during the festive season.

“The Indian markets witnessed healthy buying interest led by stable global markets. The ongoing earnings season is likely to set the tone for the Indian markets as some of the heavyweights would be declaring their results this week. We expect that more than the earnings announcement, the outlook given by the management would hold importance especially for consumption-driven companies,” said Ajit Mishra, vice president- research, Religare Broking. So far, the earnings announcement has been a mixed bag, with Tata Consultancy Services and IndusInd Bank, missing estimates, while Infosys and Hindustan Unilever posting earnings in-line with analysts’ expectation.

In the Sensex pack, Kotak Bank and HDFC Bank, rose nearly 2.15 per cent and 1.64 per cent respectively, banking stocks made a 177-point contribution to the Sensex gains.

Barring two, all 19 sectoral indices compiled by BSE gained. The BSE Auto index gained the most and ended the session 2.36 per cent higher.

Markets had hit a downward spiral during the first week of October as a fresh crisis in the financial sector diminished the positive sentiment brought by the corporate tax cuts. Investors pulled out money from stocks on worries that bad loans might spike following the turmoil in some of the key non-banking financial companies (NBFCs) and real estate entities.