The 30-share Sensex of the BSE closed the day at 10,348.83 points, gaining 446.84 points, or 4.51%. Similarly, the broader S&P CNX Nifty of the NSE gained a robust 150.70 points, or 4.92%, to end the trading session at 3,211.05 points. A significantly larger number of stocks ended higher than those that fell. According to the BSE website 2,014 stocks advanced, compared with 535 that declined. The highest gainer for the day among sectors was the BSE Realty index, which rose by 9.13%.
In its latest report, Goldman Sachs has upgraded its recommendation for Indian stocks from underweight to market weight. We believe that Indias investment merits relative to other regional alternatives have improved, the report said. It also stated that financing constraints that hurt Indian corporate profitability during the global credit crisis in the fourth quarter of 2008 have eased and so the countrys relative economic resilience has improved.
On expected corporate performance, the report states, While Indias corporate profit growth was hit (in the fourth quarter of 2008) and will remain under pressure in early 2009, we expect relatively better profitability and earnings per share growth than in most other markets.
That tone was echoed by a JP Morgan report on the latest global markets outlook and strategy, which stated, Better-than-expected economic data and effective policy action are inducing us to partly reverse last months defensive stance by increasing our exposure to cyclical stocks, financials, and emerging markets.
Thursdays positive swing on domestic bourses was aided by improved auto numbers and sustained low inflation at 0.31%, as measured by the wholesale price index. The possible announcement of another interest rate cut by the European Central Bank also lifted sentiments among market participants overseas. The ECB did cut rates to 1.25% from 1.5% later in the day. It is the sixth time the ECB has cut rates since October 2008, when it was 4.25%.
Most Asian markets surged, recording three-month peaks. Hong Kongs Hang Seng registered a gain of 1,002.43 points or 7.41%, while the Nikkei 225 posting a gain of 4.40%.
But Jahangir Aziz, chief of economic & policy research at JP Morgan India, speaking at a function at the BSE on Wednesday, was less sanguine about the rise persisting. There will be some lip service against the protectionist policies adopted by the major world economies (at the G-20 summit). However, they are expected to continue with their own policies. But on the sidelines of the conference, we can expect some international coordination on the need to regulate financial markets, Aziz said.
Madhusudan Kela, head of equity investment at Reliance Capital Asset Management, expected strong measures for the reversal of capital flight from tax heavens around the world. Certainly, we could expect strong measures in that front, he said.