The chinese central bank?s decision to give its currency a greater flexibility by relaxing yuan?s fixed rate against the dollar fuelled a rally in the global equity markets on Monday. Stock prices of metal companies also got a boost which led to the Sensex gains. The yuan in the spot market climbed as high as 6.7969 against the dollar, up 0.43%, the highest gain in five years. Asian markets ended positive led by China?s Shanghai Stock Exchange, which surged 2.9%.
Japan?s Nikkei gained 2.43%, South Korea?s Kospi added 1.62% and Singapore?s Straits Times too gained 1.84%. European markets, too, opened strong and US futures also rallied.
Indian markets also climbed to its highest closing since April 9, 2010. Sentiments domestically were also boosted after the government on Saturday ended the spat between the two market regulators ? Sebi and Irda on Ulips. Investors felt move will lead to more investments into equities. Strong FII buying gave further push to equity markets. FIIs bought equities worth Rs 1,564 crore. FII have been net buyers in the past seven consecutive trading sessions, investing Rs 6,020 crore. The benchmark BSE Sensex added 305.73 points, or 1.74%, to 17,876.55 and the NSE Nifty added 90.70 points, or 1.72%, to 5,353.3. The benchmark indices have gained 11.12% since May 26, 2010, fastest 10% rally since November 4, 2009.
The upside looks limited from current levels,? said Piyush Garg, chief investment officer, ICICI Securities, who feels the current rally will get exhausted soon. Garg, however, doesn?t think the markets will go down significantly. ?It is a buy-on-the-dips market.?
In Monday?s trade, only two of the 30 stocks on the Sensex closed in the negative. The overall market breadth was also positive as 1.8 stock advanced for every 1 decline on the BSE.
The BSE Midcap and Smallcap index gained 1.29% and 1.22% respectively. All the BSE?s sectoral indices closed with gains with the metal index surging the most at 5%, followed by realty, which advanced 2.66% and bankex, which rose 2.04%. The metal stocks led the gains on the 30-share Sensex. Sterlite Industries surged 8.28%, Tata Steel added 6.3% and Hindalco gained 5.61%. HDFC Bank and Bharti Airtel were the only losers on the Sensex, both closed just marginally down.
The total cash market turnover on both the bourses was Rs 16,903 crore, down about 10% from trading previous day. However, F&O turnover, which stood at Rs 1,19,769 crore, was up 20%.