Market cheers stimulus, signs of trade war thaw

Mumbai: Sensex and Nifty logged their best single-day gains in over three months since the return of the Narendra Modi government for the second term.

Riding on a wave of economic stimulus optimism, the Sensex surged 793 points, or 2.16 per cent, while the Nifty ended 2.11 per cent, or 228.50 points, higher.

Many global brokerage houses have turned bullish after the  Finance Minister Nirmala Sitharaman announced measures to boost the economy on Friday.

Global firms like Nomura, BNP Paribas, Morgan Stanley and Jeffries have given positive outlook for Indian equities, raising their Sensex target to over 40,000 by December 2019.

Japanese brokerage house Nomura upgraded its India rating to overweight, saying it is the time to raise allocation on positive local developments amid rising global uncertainty.

“We expect the recovery in economic growth to 6.6 percent in the second half of FY20 from 5.8 percent in the first half,” it said.

The Indian market, with less than average leverage to global growth, could do relatively better, Nomura said.

It was a highly volatile trading session as the Sensex, after opening over 663 points higher, wiped out its gains as the session progressed.

 The index, however, made a strong comeback in the later half tracking news about US-China trade talks resumption.
It swung 1,052 points during the day.

Similarly, the Nifty reclaimed the 11,000-level. During the day, it climbed a peak of 11,070.30 and touched a low of 10,756.55.
"Indian markets opened higher following policy stimulus announcement by Finance Minister on Friday with a raft of measures," said Narendra Solanki, Head-Fundamental Research (Investment Services) & AVP Equity Research, Anand Rathi Shares & Stock Brokers.

"Domestic markets recovered from the day's low in afternoon session as news of China's willingness to negotiate on US-China trade raised hopes of traders which added to the already positive domestic sentiments," Solanki said.

BNP Paribas, which has a Sensex target for Dece-mber 2019 at 40,500, said the government's flexibility and focus on ensuring confidence-boosting measures is a short-term positive, but the US-China trade tensions have turned more unfavourable for India.

Also, the government removed additional surcharge on long and short term capital gains of foreign portfolio investors.

“Government has given a clear signal that it acknow-ledges an economic slowdown. Measures will im-prove investor sentiment and drive at least a short-term bounce,” CLSA said.

Morgan Stanley said India's underperformance year-to-date to emerging markets may reverse in the weeks ahead. "Key risk is that our view on global equities is cautious," it said.