India’s benchmark stock indices staged a sharp recovery on Tuesday, recouping most of the losses seen on the Budget day session. The benchmark BSE Sensex rose nearly 900 points, or 2.3%, to hit an intra-day high of 40,767.23, while the Nifty was up nearly 270 points, or 2.3%, to 11,976.85 during the afternoon trade. For those wondering the reason behind such a sharp rally, here are the three key factors that contributed in today’s uptick in the markets:
1) Recovery in Asian markets and falling crude oil prices
Asian stocks rebounded on Tuesday after seeing a sharp fall in the previous session due to worries over global growth amid coronavirus outbreak. China’s Shanghai Composite gained half a per cent after tumbling more than 7% on Monday. Japan’s Nikkei, Hong Kong’s Hang Seng and South Korea’s Kospi also rose up to 2%.
Meanwhile, oil prices fell sharply, with Brent crude futures hitting $55 per barrel levels, amid fears of lower demand after several countries cancelled flights to China due to coronavirus. This also improved sentiment for Indian equities.
2) Sustained buying in index heavyweights
Sustained buying was seen across sectors led by index heavyweight stocks. Housing Development Finance Corp. Ltd (HDFC) was up 3.7% in the afternoon session, HDFC Bank rose 3.2%, Reliance Industries Ltd (RIL) jumped over 3%, ICICI Bank climbed 3.4%, Infosys was up 2.5% and Bajaj Finance soared 4%.
All sectoral indices were trading in the green, indicating that buying was happening across the board. Among the top gainers were the BSE Realty Index (up 3.5%), BSE Consumer Durables Index (up 3%), BSE Metal Index (up 2.8%) and Oil and Gas index (up 2.8%).
3) Morgan Stanley’s Jonathan Garner said India’s economic growth likely to pick up soon
Jonathan Garner, chief - Asia and Emerging Market equity strategist at Morgan Stanley, said he believed that India could be looking at a pickup in growth soon after a quite depressed business and economic environment. “We could be looking at a pickup in growth in India and therefore having some cyclicals in the portfolio would make some sense including industrial cyclicals and to some extent, consumer cyclicals and that’s different from what we are seeing in other emerging markets at the moment,” said Garner in an interview with CNBC-TV18.
Garner is slightly ‘overweight’ on India and thinks the market can outperform the other emerging markets.