It was a day of bulls that helped market gain more than 3 percent on hopes of rate cut and supportive global cues Tuesday. Equity benchmarks posted biggest single-day gain since May 18, 2009 (when the Sensex gained 2,110 points on elections win by UPA government).
The 30-share BSE Sensex surged 777.35 points or 3.38 percent to 23779.35 and the 50-share NSE Nifty rallied 235.25 points or 3.37 percent to 7222.30.
Experts are hopeful of rate cut as the Union Budget provided sufficient space. They were not expecting 3 percent rally in the market as Budget was not so great.
Ridham Desai of Morgan Stanley believes there is a room for rate cut for RBI now but does not expect them to advance it by a month. The cut could come about in the April policy, he feels.
According to him, the Budget chose not to take risks and retained its focus on fiscal prudence because fiscal expansion could have hurt India in case things turn for the worst in the world.
It may be a good time to enter the equity market with a 2-3 year view, says Nirmal Jain of IIFL, adding the Nifty is unlikely to fall below 6650-6700 in near-term.
Meanwhile, the rupee posted biggest single-day gains in almost 6 months, gaining past 68 a dollar following rally in equity markets. The currency closed at 67.86 a dollar, up 57 paise compared to 68.43 on Monday.
Banks, technology, auto, infra and FMCG were biggest contributors to benchmarks’ gains with sectoral indices rising 3-5 percent.
FMCG major ITC topped buying list on Sensex, up 10 percent as analysts say excise duty hike on cigarettes is on expected lines. According to them, 10 percent excise duty hike is positive for the company. Credit Suisse upgraded the stock to outperform and raised target price to Rs 370 from Rs 298.
February Auto sales were mixed with Maruti Suzuki registering a 0.9 percent degrowth, hit by Jat agitation. Mahindra & Mahindra sales grew by 16 percent, Ashok Leyland 25 percent and Eicher Motors 63 percent. Shares of Tata Motors, Maruti Suzuki, Hero Motocorp and M&M rallied 3-8 percent.
ICICI Bank was the second biggest gainer on Sensex, up 8 percent. Among others, Infosys, TCS, L&T, Adani Ports and Axis Bank gained 4-5 percent.
ONGC extended losses today as well, down more than 1 percent (in addition to 10 percent loss in previous session) as brokerages downgraded stock after change in oil cess. CLSA downgraded the stock to sell from underperform and slashed target price to Rs 170 from Rs 230.
“The change in crude oil cess to 20 percent ad valorem is a disappointment for upstream stocks. This along with assumption of lower crude and rupee drives a 15-27 percent cut in FY17/18 EPS on ONGC and Oil India,” says CLSA. Oil India fell 2.5 percent.
The broader markets also participated in rally with BSE Midcap and Smallcap indices rising 3 percent each. The market breadth was strong as about four shares advanced for every share declining on the BSE.
Global markets too were higher despite slump in China’s manufacturing sector. Germany’s DAX gained 1.4 percent. France’s CAC and Britain’s FTSE added half a percent each. In Asia, Shanghai and Hang Seng climbed over 1.5 percent. Oil prices rose 1 percent as fall in US and OPEC output might tighten an otherwise bloated market. Brent crude was trading at USD 36.92 a barrel.