Benchmarks gain on financial stocks’ rally

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Published: May 28, 2020 12:26 AM

The biggest gainers on the Nifty were Axis Bank, ICICI Bank, Wipro, Grasim Industries and Bajaj Finance up by 14.24%, 8.95%, 6.89%, 6.54% and 5.76% respectively.

Experts also suggested that the rally in Indian equities on Wednesday could also be due to short-covering by investors ahead of the monthly F&O expiry on Thursday.Experts also suggested that the rally in Indian equities on Wednesday could also be due to short-covering by investors ahead of the monthly F&O expiry on Thursday.

Indian equity markets on Wednesday were buoyed by the sharp uptick in global markets. Reopening of economies, fiscal stimulus measures and a potential novel Coronavirus vaccine has helped markets globally to hold onto their gains. Additionally, the Indian benchmarks also held on to their gains led by financial stocks.

The benchmark Sensex was up by 995.92 points or 3.25% to close at 31,605.22. The broader Nifty50 was up by 285.9 points or 3.17% to close at 9,314.95. Foreign portfolio investors (FPIs) sold stocks worth $44.04 million.

The Nifty Bank rallied by 7.28% during the day’s trading session led by heavyweights such as HDFC Bank, ICICI Bank and Axis Bank making Wednesday its best trading session since April 7. The biggest gainers on Nifty Bank were Axis Bank, ICICI Bank, Bandhan Bank, RBL Bank and Federal Bank up by 14.2%, 8.95%, 8.11%, 7.06% and 7.02%, respectively. Most of the banking stocks posed the biggest single day gains since April 7. The rally in banking stocks came despite the threat of rising non-performing assets looming over the sector and higher provisioning by banks in the March quarter on account of the Covid-19 pandemic. This is because the sector witnessed buying from institutional investors on Wednesday. Deepak Jasani, head of retail research, HDFC Securities, said, “It is said that some FPIs who were relentlessly selling banking stocks over the past few weeks and have stopped since the last few days. This has left some space for buying by institutions mostly foreign who found value in these stocks, which was seen on Wednesday.”

The Dow Jones Mini futures were up by 400 points at the time of the press, European markets too were trading well in the green. Stock exchanges in the United Kingdom, Germany and France were up by 1.5% to 1.7% during the day’s trading session. The Asian markets however, traded mixed because of flaring tensions in Hong Kong. Hang Seng, the benchmark index of Hong Kong was down by 0.36% whereas, China’s Shanghai Composite ended the day 0.34% lower. Korea’s Kospi traded flat up by 0.07% on the other hand, bourses in Taiwan and Indonesia were up by 0.16% and 0.3% respectively.

Indian markets, which had been underperforming most global markets so far this year, outperformed them during the day’s trading session. This according to experts is because the markets were playing catch up with the other global markets. “Typically, though all markets rise or fall in one direction, the extent of rise or fall differs based on local factors. The Indian market is playing catch up with the global markets and the upward momentum could continue for the next few days,” said Deepak Jasani of HDFC Securities.

Experts also suggested that the rally in Indian equities on Wednesday could also be due to short-covering by investors ahead of the monthly F&O expiry on Thursday. The stock exchanges witnessed a turnover worth Rs 17.27 lakh crore in the F&O segment against the six month average of Rs 14.21 lakh crore, data on NSE shows. On the other hand, the cash market saw volumes worth Rs 52,449 crore against the six month average of Rs 40,898 crore.

According to the provisional data on the exchanges, FPIs sold equities worth $44.04 million on Wednesday and domestic institutional investors bought equities worth $316.9 million. FPIs have been sellers for three straight months in Indian equities pulling out $8.3 billion in March, $30.5 million in April and $941.37 million so far in May, excluding the funds brought in through the Hindustan Unilever block deal.

The biggest gainers on the Nifty were Axis Bank, ICICI Bank, Wipro, Grasim Industries and Bajaj Finance up by 14.24%, 8.95%, 6.89%, 6.54% and 5.76% respectively. The biggest losers were Sun Pharma, Ultratech Cement Company, Zee Entertainment, Titan and Asian paints down by 1.95%, 1.4%, 1%, 0.87% and 0.84% respectively. The broader markets underperformed the benchmark during the day’s trading session with Nifty Midcap and Nifty Smallcap up by 0.59% and 0.65% respectively. Sectorally, the biggest gainers were Nifty Private Bank, Nifty Bank, Nifty Financial Services, Nifty PSU Bank and Nifty IT. The only sectoral losers were Nifty Pharma and Nifty Media.

Siddhartha Khemka, head -retail research, Motilal Oswal Financial Services, said, “Apart from global sentiments, investors will closely monitor the quarterly results, development around novel Coronavirus cases and vaccines, US-China tensions and any announcements related to further stimulus globally.”

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