Robust indicators and strong global cues lift benchmark indices

All eyes now on US Fed meet this week, say analysts

The benchmark indices rebounded on Monday, rising 1.4 per cent, after three consecutive days of declines buoyed by interest in IT and banking majors, optimism surrounding manufacturing data, and favourable global cues. The benchmark Sensex rose 831 points and closed at 60,138, while the Nifty rose 258 points to close at 17,946.

The indices had fallen sharply last week due to institutional selling and downgrade by some foreign brokerages citing valuation concerns. However, data on India’s manufacturing activity released on Monday brought some cheer.

The purchasing managers’ index (PMI) rose to 55.9 against 53.7 in September. This came on the back of new orders and improved production. However, higher input costs are denting profits.

“Today’s rally provided relief to the investors post the recent sell-off. Good earnings season and strong macro data uplifted confidence with regards to economic recovery. Corporate commentaries continue to remain upbeat, with managements across sectors alluding to strong demand trends. With the economic cycle picking up, we expect the corporate earnings growth to revive, which has been lacking for many years now,” said Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services.

Global markets, too, gained as robust earnings offset concerns about inflation and supply-side woes as a result of the pandemic. Investors are keenly watching central bank meetings in the US and some other developed countries to gauge how the tapering of bond purchases will pan out. The US Federal Reserve is likely to announce its plans for stimulus tapering during its meeting this week.

On Monday, US Treasury Secretary Janet Yellen expressed confidence in the US economy’s recovery from the pandemic.

Analysts said investors will keenly watch the US Fed’s response to inflation, rather than its tapering of bond purchases. Apart from the US Fed, the Bank of England and the central banks of Australia and Norway will also meet this week.

In the Asian markets, Japan’s Topix rose as the victory of the ruling Liberal Democratic Party raised hopes of a stimulus. The Hang Seng, however, fell as Covid-19 outbreaks in China dented sentiments.

“We feel it’s a rebound, and the bias would change if Nifty manages to cross and hold above 18,100. Meanwhile, participants should continue with the cautious approach and do not jump into a trade. The upcoming US Fed meet and earnings will dictate the trend ahead,” said Ajit Mishra, vice-president of research, Religare Broking.

The market breadth was strong, with 2,119 stocks advancing and 1,193 declining — 371 stocks were locked on the upper circuit on the BSE, and 190 hit their 52-week highs.

IndusInd Bank was the best performing stock on the Sensex and gained 7.7 per cent. HCL Technologies rose 3.9 per cent, and Bharti Airtel 3.8 per cent. All the sectoral indices on BSE ended with gains. Realty and telecom stocks rose the most, and their sectoral indices gained 3.56 and 3.5 per cent, respectively.