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The BSE's benchmark Sensex on Monday rose the most in nearly two weeks, regaining the 20,000 mark, following heavy buying in index stocks after last week's fall.
The gains were led by Reliance Industries, which rose a little more than five per cent after a significant gas discovery. Sun Pharmaceuticals rose nearly five per cent, ahead of its quarterly results.
The 30-share Sensex ended at 20,030.77, up 326.44 points, or 1.7 per cent, the most since May 15; only three of its components ended with losses. Meanwhile, the National Stock Exchange's Nifty climbed 99.60 points, also 1.7 per cent, to 6,083.15.
Experts said stocks rose as the trend of money moving out of bonds into riskier assets continues. They said last week's correction had also provided some valuation comfort. A positive opening in Europe added to the positive sentiment. Asian markets, meanwhile, ended mixed, with the Nikkei falling three per cent and the Chinese market gaining after Japan's central bank suggested interest rates might gain as the economy improved.
"Actually, there wasn't anything for the market to fall last week. The reading by the market that the stimulus will stop was misplaced," said Siddharth Bhamre, head, equity derivatives, Angel Broking.
"The stimulus will only be stopped if the unemployment rate comes down to 5.5 per cent and economy growth rate continues above 2.5 per cent in the US. That's not going to happen in a hurry and if it happens, the focus will anyway shift to growth."
Last week, the Sensex had declined nearly three per cent, its first weekly drop in six weeks, on the back of speculation that the US Fed might withdraw its stimulus programme.
"After the recent fall, the market had reached a good level for investors to re-enter," said the head of institutional sales with a foreign brokerage, requesting anonymity. "Bond yields in most developed markets are going up. This signals that investors are selling bonds and getting into riskier assets. We don't expect a major correction."
Foreign institutional investors (FII) continue to remain aggressive buyers. Provisional data showed FIIs purchased shares worth Rs 406 crore on Monday, while domestic investors net-sold shares worth Rs 516 crore.
Liquidity easing by central banks across the globe has led to huge portfolio flows into emerging markets. India itself has seen FII flows of close to $14.5 billion (Rs 78,000 crore) so far this year.
Some experts feel that given the expensive valuations and mixed fourth quarter (of 2012-13) earnings posted by India Inc, further upsides could remain capped. The March quarter economic growth data, due this week, is being keenly awaited by the markets.
