US-China trade deal hopes propel markets, Sensex reclaims 41,000-mark

The benchmark indices rose on Friday, along with other global markets, as investor appetite received a boost on news that the US and China were closing in on a limited trade deal, including a reduction in the existing tariffs. 

Most European indices gained amid the UK election results, which showed Prime Minister Boris Johnson cruising towards a majority, stoking hopes that the outcome would put an end to the Brexit saga. The Conservatives romped home, winning 365 seats in the 650-seat House of Commons.

The Sensex gained 428 points, or 1.05 per cent, to end at 41,010, the highest close in two weeks and only 120 points below the previous high. The Nifty gained 114 points, or 0.96 per cent, to close at 12,087.

Experts said the markets were bolstered by the US’ proposal to roll back tariffs on Chinese goods worth $360 billion, imposed after the trade war began in March 2018. Market players said recent global developments had subsided the fear of a prolonged slowdown in the global economy.

"The signing of the phase one trade deal between the US and China has come after a series of ‘on & offs’ over trade negotiations and appears a new positive step. This, along with the emphatic victory of Boris Johnson in the UK polls, has come as a major relief for the slowing global economy,” said V K Vijaykumar, chief investment strategist, Geojit Financial Services.

On Friday, both foreign as well as domestic investors were net buyers in the cash segment. Foreign portfolio investors (FPIs) bought shares worth Rs 116 crore, while their domestic counterparts invested Rs 385 crore.

Twenty-four companies in the Sensex pack rose, led by Axis Bank, which gained 4.2 per cent. Vedanta and State Bank of India rose more than 3 per cent each. Among the losing stocks were Bharti Airtel and Kotak Mahindra Bank, which fell 2.5 per cent and 1.4 per cent, respectively.

Barring one, all the 19 sector sub-indices compiled by the BSE gained, led by a gauge of metal companies. The BSE metal index gained 2.3 per cent followed by realty index, which rose by 1.72 per cent.

In the past three sessions, the benchmark indices have rallied more than 2 per cent. Markey players said expectations that the government would come out with more measures to boost the economy in the upcoming Budget are keeping sentiment bullish. However, some say investors needed to be cautious, given the weak economic data. The retail price inflation in November jumped to a 40-month high despite a slowdown, which led to some economists warning that the country could be entering into a stagflationary phase.

“We advise exercising caution in the stock selection process. One should opt for index majors over the stocks in the broader market,” said Ajit Mishra, vice president-research, Religare.