Better Monsoon outlook powers Sensex, Nifty rally

Mumbai: The domestic equity markets soared over two per cent on Wednesday after a private weather forecaster Skymet predicted an above normal monsoon for India triggering a strong rally in banking, capital goods and auto sector stocks.

Global financial services firm Morgan Stanley has also upgraded its outlook on India to ‘overweight’ from an ‘equal weight’ ratings, citing the improvement in corporate balance sheets and prospects of better monsoons and further rate cuts in coming months. These factors coupled with a rally in global stocks fuelled by robust housing data in the US, helped the Indian markets to maintain their winning momentum.

After opening the day on a positive note, the Sensex surged 575.70 points or 2.28 per cent to end the day at 25,881.17 while the Nifty ended the day at 7,934.90, gaining 186.05 points or 2.40 per cent.   

Experts added that the gains in global stocks amidst strong economic data from US led to a gap-up opening for both the Sensex and the Nifty. This, according to traders, triggered short covering in the derivatives markets pushing the markets higher. “During the past few weeks, the domestic equities didn’t witness any knee-jerk reaction to negative news like the str-engthening of the norms governing the issue and transfer of P-Notes and change in tax treaty with Mauritius. This shows the inherent strength in the market with fresh buying emerging at every small correction,” said Ambareesh Baliga, senior research analyst.    

Global markets rallied higher tracking gains in US stocks as the new home sales in US surged to an eight-year high in April reassuring investors that the US economy iis on a firm footing to withstand rate hike. Most of the Asian markets ended the day higher with Hang Seng Index and Nikkei 225 gaining 2.71 per cent and 1.57 per cent respectively.