Sensex@19,000

Tags: News

Investors earn Rs 80,000 crore in a day as stock indices surge 1.72%

The market surged for the second-day running on Thursday, touching a 19-month high on hopes that the government could push through key reforms after the Manmohan Singh-led UPA government agreed to a vote in Parliament on allowing foreign firms in multibrand retail.

Adding to the bullish sentiment was a report by Goldman Sachs which upgraded Indian stocks to ‘overweight’ from ‘market weight’ status, citing “cyclical recovery, moderate valuation and an inexpensive currency” with a 2013 Nifty target at 6,600, another 14 per cent upside from present level.

Massive short-covering by traders also pushed up stock prices and the benchmark indices, said analysts.

Sensex jumped 328.83 points (1.75 per cent) to cross the crucial 19,000 mark to hit 19,170.91, the highest level since April 28, 2011. The rally came on the back of a 305-point rise on Tuesday. Wednesday was a market holiday. Nifty rose 97.55 points (1.70 per cent) to 5,825.

Some analysts said investors became richer by over Rs 80,000 crore with the over 1.7 per cent rise in the benchmark equity indices. Led by the strong uptick in the market, the total investor wealth rose by Rs 80,375.26 crore to Rs 66,74,394.71 crore. Across the Bombay Stock Exchange, 1,681 stocks rose while 891 shares gained on the National Stock Exchange.

News that the US economy grew 2.7 per cent during July-September, more than previously estimated, and a rally in the US stocks early on Thursday helped the market. Also, expectations that the fiscal cliff will be resolved with president Barack Obama reaching an agreement with the Congress over a new budget is expected to spur the Indian market on Friday, said analysts.

“For India, we believe the upside drivers will be a recovery in growth, drop in inflation and the potential for continued policy reforms. While we acknowledge that the recovery in growth and deceleration of inflation may not be imminent, India is less affected by the near-term concerns of the US fiscal cliff compared with the other markets in Asia,” Goldman Sachs said in its report on Asia-Pacific titled “2013 Outlook: Prospects brighten as growth recovers”.

Real estate (3.38 per cent), bank (2.76 per cent), auto (2.08 per cent) stocks were the biggest gainers among various sectors on Thursday as investors rushed toward them to benefit from an interest rate cut that is expected from the first quarter of the new calendar.

Bajaj Auto shot up 5.01 per cent to Rs 1,952.55, ICICI Bank rose 4.59 per cent to Rs 1,081.75 and Tata Motors 4.45 per cent to Rs 278.25 on BSE.

“The market is in strong hands (institutions – both domestic and foreign) and retail investors are exiting at every rise. As long as this is the case, we believe stocks will rise further,” said Rajesh Jain, executive vice-president and head of retail research at Religare Broking.

Foreign institutional investors (FIIs) have invested $19.42 billion (Rs 1,01,283 crore) in Indian stocks so far this calendar. On Thursday, they bought shares worth Rs 1,580 crore.

On Tuesday, Moody’s gave a stable outlook on India, easing fears of downgrades from other global rating firms such as Standard & Poor’s and Fitch.

Manish Sonthalia, VP and fund manager of Motilal Oswal AMC-PMS, was of the view that the 19,000 mark was “nothing to get too excited about” though it “has come sooner than what most people expected.”

“We would see much higher levels in the months to come,” Sonthalia said.

Kishor P Ostwal, CMD of CNI Research, reckoned that the main driver of the market was “the covering of huge short positions which led to the stunning rally.” Fresh derivative settlement begins on Friday and “If market opens with a gap up and sustains above 5,840 even for two hours, we may see Nifty touch 6,000 next week. Lack of conviction and fear of correction are refraining traders from entering the market. The cash settlement system once again came handy to create price impact on all stocks, where shorts were visible though this time the bulls benefited the most,” Ostwal said.

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