Talk of stimulus spurs stock market rally

Mumbai: Monday saw a broad-based rally in the stock markets led by banks and financials, thus continuing the trend from Friday. Many factors fed this optimism: there are expectations of a stimulus ahead of the festival season and a further opening up of the economy. Also, the postponement of a Supreme Court verdict in the case relating to interest on loans during the moratorium period and some positive global cues.

The Sensex and Nifty 50 gained over 1.5 per cent on Monday with the Sensex rising above the 38,000 mark, and closing 592.97 points up at 37,981.63.
Nifty-50 gained 177.30 points to close at 11,227.55.

According to Siddhartha Khemka, head of Retail Research, Motilal Oswal Financial Services, global cues have turned positive amid signs of China’s economic recovery given its upbeat industrial data.

Further hopes of a stimulus package announcement by the US government also kept the mood positive.

On the domestic front, positive global cues, expectations of a stimulus package from the Union government along with speculation of a further opening up of the economy, cheered the market.

Banking stocks gained on hopes that the government may infuse some capital into the sector in order to provide support to them over waiving interest rates on loans under a moratorium.”

Broader market outperformed the benchmarks with Nifty Mid-cap 50 up 3.63 per cent and Nifty Smallcap 100 up 3.58 per cent. BSE Mid-cap index gained 2.68 per cent and BSE Small-cap index gained 2.54 per cent.

Reports saying Maharashtra government may soon allow dine in services in restaurants led to rally in hotel stocks, gainers included Indian Hotel, EIH, Lemon Tree, Speciality Restaurant, Kamat Hotel among others.

West Bengal government would allow opening of cinema halls and multiplexes led to rallies in PVR and Inox Leisure.

Among the sectors, heavyweight BSE Bankex index gained 3.58 per cent while NSE Nifty Bank gained 3.26 per cent. BSE and NSE Auto indices also gained more than 3 per cent ahead of September month sales data due on October 1.

Vikas Jain, senior research analyst, Reliance Securities said, "Nifty-50 has witnessed a strong bounce from its 200-day average placed at 10800 levels. The banking sector has to lead the up move ahead of the monetary policy and being oversold on daily charts.”

 Domestic institutions were net buyers of equities worth Rs 542.34 crore while foreign portfolio investors pause on selling Indian equities seem to have boosted market sentiments. FPIs were net sellers by Rs 26.98 crore compared to heavy selling daily of around Rs 1500 to Rs 2,000 crore seen last week.

"Going ahead, the market may remain positive in the near term in the hopes of stimulus package announcement and further easing of restrictions which will improve demand," Khemka said.