Indices at near four-month high, revival in auto and consumer demand provide push

By: |
October 30, 2019 1:07 AM

Market participants believe the better-than-expected corporate earnings performance for the quarter ended September and improving demand conditions has led to a bullish sentiment in the market.

More than half of Sensex’ rally on Tuesday came from just four stocks — Reliance Industries (RIL), Tata Consultancy Services, Axis Bank and ICICI Bank.More than half of Sensex’ rally on Tuesday came from just four stocks — Reliance Industries (RIL), Tata Consultancy Services, Axis Bank and ICICI Bank.

Benchmark indices on Tuesday closed at a near four-month high, buoyed by gains in auto and metal stocks. Better-than-expected corporate earnings for the September quarter so far and a revival in auto and consumer demand in the festive season, coupled with media reports on possible tax relief for equity markets, boosted investor sentiment. Of the 19 sectoral indices compiled by BSE, all barring BSE Telecom, ended the day in the green with BSE Auto and BSE Metal gaining 4.2% each.

The Sensex rose 1.48%, or 581 points, to end the day at 39,831 points, which is just 436 points away from its new high. The broader Nifty50 closed 1.37% higher at 11,786. Out of 30 stocks on the Sensex, 26 ended in the green and the remaining four in the red. Reliance Industries, Tata Motors, Tata Steel and Axis Bank drove the rally, while Bharti Airtel, SBI and Powergrid emerged as the biggest losers. More than half of Sensex’ rally on Tuesday came from just four stocks — Reliance Industries (RIL), Tata Consultancy Services, Axis Bank and ICICI Bank.

On Tuesday four stocks — RIL, Hindustan Unilever and ICICI Bank — hit record highs.

Foreign portfolio investors (FPIs) bought shares worth $123.75 million on Tuesday, provisional data on exchanges showed. So far in October, overseas investors have purchased equities worth $678 million after pumping in nearly $1 billion in September. In contrast, they had pulled out nearly $4 billion in July and August.

According to Siddhartha Khemka, vice-president and head-retail research, Motilal Oswal, “liquidity driven momentum might continue, given FPIs have begun to marginally increase investments into Indian equities.”

Market participants believe the better-than-expected corporate earnings performance for the quarter ended September and improving demand conditions has led to a bullish sentiment in the market. “There was pent up demand in the system which has now begun to come up and can be seen in some auto sales figures, which has led to improvement in sentiments,” said Deven Choksey, managing director, KRChoksey Investment Managers.

Shares of Tata Motors surged 16.63% on Tuesday to close at Rs 172.55, following better-than-expected earnings for the quarter ended September 2019. The automaker’s luxury arm — Jaguar Land Rover (JLR) — beat estimates by posting strong EBITDA growth with margins improving my nearly 1,000 points sequentially led by increased volume growth in China. “While some like the forex benefit are likely to reverse, we are still positively surprised by impact of project charge and mix improvement, which could sustain,” said analysts at Jefferies.

Moreover, Tata Motors announced during its Q2FY19 results on Friday that Tata Sons, the holding company for Tata Motors, will invest Rs 6,500 crore of equity through preferential allotment. “The infusion should support the balance sheet given the rising leverage,” added analysts. The surge in group stocks has added Tata Group’s market capitalisation by Rs 42,637 crore.

Furthermore, optimism over the US-China trade deal and an expectation of a rate cut by the US Federal Reserve in the upcoming Federal Open Market Committee (FOMC) meeting supported gains in the local market. US President Donald Trump said that the first phase of the trade deal with China could be signed at a summit due in Chile next month.

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