The Sensex on Thursday regained the 40,000 mark after more than seven months while the Nifty got closer to the 12,000 level on optimism around a US stimulus package and a rebound in the Indian economy amid further easing of Covid-19 restrictions.
Most Asian and European markets edged higher following robust overnight gains on the Wall Street on renewed hopes that a stimulus deal could be inked before the presidential election in November.
Information technology (IT) stocks led the gains in the domestic market after the strong showing by Tata Consultancy Services (TCS) in the September quarter.
Gaining for a sixth day, the Sensex rose 304 points, or 0.76 per cent, to end at 40,183, the most since February 25. The Nifty rose 96 points, or 0.8 per cent, to end at 11,835 — 4.2 per cent below the all-time high.
Both the benchmark indices have rallied 6 per cent in the last six trading sessions on the back of strong inflows from overseas investors. After a turbulent September, investors’ appetite for risky assets seems to have made a comeback. According to the provisional data on the exchanges, the foreign portfolio investors (FPIs) bought equities worth Rs 978 crore on Thursday. In the past five trading sessions, FPIs have pumped in more than Rs 5,000 crore into domestic stocks.
On Wednesday, US President Donald Trump suggested a new stimulus bill a day after announcing that he would walk away from negotiations. Trump tweeted that Congress should pass money for airlines, small businesses, and stimulus checks of $1,200 for individuals. Hopes for a fresh stimulus had looked slim after Speaker Nancy Pelosi called Trump’s decision to cease negotiations until after the election a “terrible mistake”. The Democratic-controlled House last week had approved a new fiscal stimulus package worth $2.2 trillion. At the same time, the Trump administration wants to spend up to $1.6 trillion.
Also, the better-than-expected quarterly numbers by TCS and a $2.20-billion buyback announcement enthused investors. After TCS, Wipro said it would consider a share buyback plan next week. Analysts said the buybacks from tech majors were likely to keep investors upbeat. Moreover, investors are buoyed by the signs of an economic revival. Earlier this week, Housing Development Finance Corporation (HDFC) said its loan business had improved in the second quarter. Also, Titan said it had witnessed a sharp recovery across business verticals in September. Last week, Maruti Suzuki, the largest automaker, reported a 30.8 per cent rise year-on-year (YoY) in September.
The India Services Business Activity Index, compiled by IHS Markit, rose for the fifth straight month. The Composite PMI Output Index rose to 54.6 in September, from 46 in August.
“The updates and results from big companies are quite encouraging. They suggest things are almost back to normal,” said U R Bhat, director, Dalton Capital India.
Investors are also counting on a pick-up in economic activity after the easing of restrictions will kick-start on October 15. The central government has announced Unlock 5.0 guidelines allowing cinema halls and entertainment parks to open. Moreover, Indian businesses are counting on a pick-up in consumer spending from this month with the start of the festive season. From now on, analysts said, the prospects of an earnings recovery, aided by monetary easing and policy support, would remain the dominant theme for investors till the end of this year.
“The markets will be facing the questions on the sustenance of the economic recovery early next year. Till then, unlock and festive season enthusiasm will drive the normalisation of numbers,” said Saurabh Mukherjhea, founder, Marcellus Investments.
About 150 stocks hit their 52-week highs and 250 stocks were locked in the upper circuit on Thursday. The market breadth was negative, with total advancing stocks at 1,239 and those declining at 1,441 on the BSE. India’s market cap edged past Rs 160 trillion after three weeks. In intra-day trade, India's market cap hit an all-time high of Rs 161.7 trillion.
Ultratech Cement and TCS were the best-performing Sensex stock, gaining 3.2 per cent each. ONGC and ITC were the biggest losers.