Both equity and debt markets on Tuesday cheered the surprise announcement by the Narendra Modi government to slash its market borrowings through sales of Treasury bonds to 48 per cent — about Rs 2.88 trillion or $44.52 billion — for the first six months of new fiscal staring 1 April from 60 per cent to 65 per cent for previous years.
The yield on 10-year bond plunged 25 basis points in morning trade to 7.37 per cent which is the biggest slide since November 2013. Global cues also improved as worry over United States- China trade war also eased which gave boost to equity trade in Asia Pacific markets.
The 30-share Sensitive Index of Bombay Stock Exchange and 50-scrip Nifty of National Stock Exchange traded strong since the opening bell.
The government’s decision came a day before the release of the latest financial deficit data (estimate) on Wednesday which analysts say too should be positive, increasing optimism.
The Centre’s disciplined approach towards its borrowing plan in 2018-19 came as a big relief for bond traders who also welcomed the report of the government and Reserve Bank of India holding talks to increase limit of rupee-term investment by foreign portfolio investors in domestic debt market apparently taking note of foreign funds unwinding their bond-holdings positions in 2018 in response to a global crisis in global bond markets.
Analysts say the government move could be the first step towards promoting a sustained bull rally in the bond market — and by implication the equity market — to revive participants’ confidence.
The smart move by the government is based on ground reality feedback, say analysts. Data with Clearing Corp of India suggests that state-run banks this year have been selling sovereign bonds of Rs 5 billion or more per day.
With just one more trading session remaining in the fiscal 2017-18 before Dalal Street shuts for a big weekend, the Sensex closed with 0.38 per cent gain at 33,174.39 (+107.98) points. Nifty at 10,184.15 (+53.50) points increased 0.53 per cent. Bank shares again hogged the focus and investors’ interest which took Nifty Bank and Nifty PSU Bank of NSE to end at 0.78 per cent and 2.08 per cent increases at 24,434.15 (+189.80) points and 2,935 (+ 84.90) points respectively.
Analysts say the first two trading days of the week have been surprisingly smooth considering Wednesday’s expiry of F&O derivatives series for March.
In the month so far, FPIs are net purchasers in equity of Rs 8,932.2 crore (in Monday’s rally they sold shares of Rs 741.19 crore to book profit at higher levels) while DIIs chipped in with Rs 409.34 crore net buying and taking their March’s tally to Rs 2,560.33 crore.
Private lender Bandhan Bank in the aftermath of a successful IPO that raised Rs 4,500 crore was listed at 33 premium at Rs 499 on NSE and Rs 485, 29 premium on BSE. The bank has a market value of Rs 371.59 billion.
The IPO was oversubscribed 14.6 times while in qualified institutional buyers’ segment it oversubscribed 38.67 per cent. Besides bank shares, metals shone in Tuesday’s trade, tracking a bullish end to Wall Street where Dow Jones was up 2.84 per cent, S&P500 2.72 per cent and Nasdaq ended with 3.26 per cent gain.
Analysts expect benchmarks to trade with upside momentum in April on expected increase in earnings of India Inc. and financial segment.
In the Sensex 21 shares moved up and 10 down. For Nifty the ratio was 38:11:1. gainers in BSE benchmark included, SBI Rs 253.25, 2.80 per cent; IndusInd Bank Rs 1,86, 1.46 per cent; Tata Steel Rs 589.60, 1.23 per cent; Kotak M Bank Rs 1,052.60, 1.25 per cent; and HUL Rs 1,335, 1.10 per cent.