A relief rally swept Asia-Pacific markets on Monday on positive global cues such as an impressive job data (non-agriculture payrolls) from the US suggesting softening of inflation risk as well as less possibility of faster interest rate hike by the US Federal Reserve in 2018.
The bullish sentiment spread from Japan, Hong Kong and other Far East markets to Dalal Street and other markets accelerating buying by investors and foreign funds.
Dalal Street analysts say the currency and equity markets were also anticipating moderation in consumer price index-linked inflation for February and a “steady” IIP or index of industrial production that were to be declared later in the day.
The rally in D Street gathered momentum in the afternoon on a strong start to equity trade on European exchanges which too , according to analysts, reacted positively to American employment numbers. The benchmarks ended the day with the highest upside margin of 2018.
IT, metal, FMCG and private banks with select auto stocks witnessed most buying by participants.
The 30-share Sensitive Index of Bombay Stock Exchange and 50-scrip Nifty of National Stock Exchange held on to their gains for most part of the day’s business. Analysts also pointed out to 1.2 per cent increase in wider MSCI (Morgan Stanley Composite Index) for Asia Pacific that excludes Japan claiming brisk buying by investors.
According to latest numbers, foreign portfolio investors or FPIs on Friday were net buyers in domestic shares of `550.36 crore and DIIs were net sellers in equity of Rs 65 crore. Friday’s rally had fizzled out after a robust start.
But the Sensex gained 1.83 per cent to end 33,917.94 (+610.80) points. Nifty at 10,421.40 (+194.55) was 1.90 per cent up. in Nifty Bank stocks of state-run lenders were laggards as one more alleged fraud of Rs 5,000 crore has been reported by the Enforcement Directorate in Andhra Bank after booking its ex-director Anup P Garg for facilitating the credit line to Sterling Biotech allegedly in exchange of `1.52 crore bribe money.
Nifty Bank ended 24,664.20 (+367.75) points up 1.51 per cent mainly on gains posted by private lenders such as ICICI Bank but State Bank of India wilted under late selling pressure to end in red. Nifty PSU Bank was down 0.47 per cent ending 2,844.70 (-13.46) points.
Analysts are unsure whether Monday’s rally will be sustained over the next four days. Stocks movement will be guided by how domestic macros CPI for February and IIP (which is a measure of the performance of manufacturing sector) for January as well as external factors.
Emerging markets are now intricately linked to several sensitive developments. Another positive for regional markets was easing of the tension between the US and North Korea.
Analysts also played down the risk of a trade war after President Donald Trump scaled down his rhetoric apparently directed at China.
Giving its India perspective, UBS Securities said, “In perspective India is already an overweight market for many investors.
(Although) they have trimmed their overweight (position) on India, the country still remains an overweight market.
So the incremental flows which emerging markets are getting globally, India is not getting a similar level (of investment) of flows in a proportion that it used to receive earlier. This is so because investors are seeing opportunities in other markets as well.”
Germany’s Deutsche Bank reaffirmed its “buy” rating on the country’s largest car maker Maruti-Suzuki with a target price of `10,000. The stock has declined 10 per cent year-to-date due to overhang of potential negative surprises.
Forex and raw materials pose a risk to margins but impact should be low.
The company continues to be in a sweet spot in its model-cycle.
In Sensex 30 shares advanced and one declined. For Nifty the ratio was 47:3. Gainers in BSE benchmark included Bharti Airtel `422.35 (6.08 per cent); ITC `270.65 (4.34 per cent); ICICI Bank `301.10 (2.87 per cent); Axis Bank `517 (2.31 per cent); and RIL `930 (1.97 per cent).