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The BSE Sensex registered its sharpest seven-day rally in the past five-and-half years to gain 1,900 points, or seven per cent, on Friday. This comes in the wake of a better-than-expected quantitative easing (QE) programme announcement by European Central Bank (ECB) President Mario Draghi on Thursday, and last week’s surprise interest rate cut by RBI.
The Sensex surged 273 points on Friday to close at 29,278.84, and has rallied 1,932 points in the past seven trading days since January 15, reporting its highest rise since May 2009. The Nifty, which closed at 8,836 levels on Friday, has surged 558 points during the period. In 2009, between May 15 and 19, the Sensex had gained 2,429 points in three trading sessions after the Congress led government came back into power. In 2013, in five trading sessions between September 4 and 11, the index rallied 1,762 points on the back of net buying of Rs 5,225 crore by foreign institutional investors (FIIs).
“ECB's massive QE bodes well for fighting the deflationary forces in the Euro region and taking growth to its intended levels. Considering the US economy’s recovery, the ECB’s QE package has increased the optimism over improvement in global demand, albeit at a slow pace. Also, apart from QE's effects on global economy's health, it would dictate liquidity at a time when the US is edging toward a divergent view,” said Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services. “The QE package size has surprised the markets and emerging markets are placed well to receive the same. Two more crucial events are awaited - the Greek vote and Fed meet. Once these events are past us, India is better placed to factor Budget expectations and reforms,” he added.
One of the notable features of the week was the stark under-performance of the mid-caps the BSE Mid-cap index gaining two per cent, while BSE Small-cap index moved 1.5 per cent during the period. Between January 15 and January 21, in six trading days, FIIs have pumped in Rs 7,206 crore in the equity markets.
During the current rally, stocks from interest rate-sensitive sectors such as realty and banking have outperformed the market, with their indices gaining 12 per cent and eight per cent, respectively, while the capital goods index gained nine per cent during the period. Consumer durables, automobiles, power, metal, and healthcare indices also moved higher between six and seven per cent.
“I think that the markets are still celebrating the rate cut by RBI. ECB’s move has added to the euphoria. The outcome of elections in Greece can change the market’s complexion dramatically. Moreover, there is an FOMC (Federal Open Market Committee) meeting on January 27-28. I think one should wait for these events to happen before taking a fresh investment call,” said U R Bhat, managing director, Dalton Capital Advisors.
Among stocks, DLF, D B Realty, Housing Development and Infrastructure, Prestige Estates and Indiabulls Real Estate from the real estate sector; and India Cements, Shree Cement and Prism Cement from the cement sector have rallied more than 15 per cent each.
Axis Bank, Sun Pharmaceutical Industries, Larsen & Toubro, Tata Motors, Tata Power and Bharti Airtel from 30-share S&P BSE Sensex have gained between 10 and 12 per cent during the period.
