After experiencing bloodbath on Dalal Street last week, the BSE benchmark Sensex on Monday leaped by 568 points — its biggest single-day gain in over a year. The stocks remained bullish intraday and gained strength with support from mostly banks, metals, auto, capital goods and oil & gas on heavy buying by domestic investors. The Rs also firmed up by 16 paise to close at 68.07 against the dollar, while gold, on the contrary, lost some of its sheen and dropped by up to Rs705 per 10 grams. Finally, the rally helped the Sensex and the Nifty recapture their 23,000 and 7,100-point levels, respectively.
Market mood changed for the better after Asia rebounded from recent weakness as fears over global economic slowdown eased and crude prices rallied. The sentiment of investors also changed when wholesale inflation for January remained in a negative zone at (-) 0.9 per cent as against (-) 0.73 per cent a month earlier.
On domestic front, shares of public sector banks (PSBs) such as Bank of Baroda, State Bank of India (SBI) and Punjab National Bank (PNB), which saw huge fall last week due to their earnings’ woes, spurted up to 25 per cent after Finance Minister Arun Jaitley on Sunday hinted at more banking reforms. For instance, Nifty PSB index rallied as much as 9.57 per cent led by gains in Bank of Baroda stock, which hit an intraday high of Rs142.10, up 24.89 per cent on the National Stock Exchange (NSE).
“There are a series of banking reforms which he is likely to be announced in the days, adding the country is not at a stage where the Government can completely exit its holding in the 27 State-run banks,”Jaitley said.
Besides, Reserve Bank of India Governor Raghuram Rajan had also soothed the nerves of the banks on Friday by saying there won’t be a repeat of the asset quality review (AQR) that has hit the banks’ bottom lines.
Experts believe that Monday’s rise certainly helped the Sensex turn to the second-biggest single-day gain since BJP-led NDA Government coming into power in May 2014 is because of banking reforms hinted by the Finance Minister. “The Finance Minister’s hints on big banking reforms added more legs to the short covering seen on Friday, following a week-long sharp and sustained sell-off,” said Anand James, Co Head Technical Research Desk at Geojit BNP Paribas.
The 30-share BSE Sensex settled the day higher by 568 points with a comfortable position since January 15, 2015, when the Reserve Bank went for a surprise 25-basis point rate cut, the first of four such reductions last year. The 50-share NSE Nifty too surged 182 points to 7,162.95. Both indices had taken a severe beating and posted their worst weekly performance since July 2009, with the Sensex tumbling 1,631 points and Nifty down 508.15 points.
The rally mostly came on the back of visible signs of life in global stocks after last week’s huge sell-off and domestic institutional investors (DIIs) upping their buying momentum. DIIs turned net buyers as they bought shares worth nearly Rs2,000 crore while foreign portfolio investors (FPIs) offloaded shares worth Rs1,300 crore, according to the provisional data.
Moreover, covering up by speculators who had been creating short positions in the past several sessions buoyed sentiment. In the process, total investor wealth of BSE-listed firms went up by over Rs2.52 lakh crore to Rs88,62,680 crore. The biggest lender, SBI rebounded 7.94 per cent to Rs167.25 on value-buying. Bank of Baroda zoomed over 22 per cent despite the lender recording the highest-ever quarterly loss.
All BSE sectors led by metal, capital goods and realty climbed up to 8.79 per cent, reflecting the buying spree. In step with the overall trend, broader market BSE mid-cap rose 3.47 per cent while BSE small-cap edged up by 3.35 per cent.