No Monday blues: Markets maintain forward march

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Updated: September 24, 2019 3:09:58 AM

On the other hand, domestic institutional investors (DII) bought shares worth $ 41.1 million on Monday against Friday’s purchase of $ 422.5 million.

This is the highest two-day gain in over a decade.This is the highest two-day gain in over a decade.

With analysts revising the earnings estimates for FY20 following the cut in corporate tax rates, the benchmark indices continued their upward momentum on Monday as well, gaining over 8% in the last two sessions. This is the highest two-day gain in over a decade.

But unlike the broad-based rally which was seen on Dalal Street on Friday, finance stocks fuelled Monday’s rally with firms such as HDFC Bank, HDFC, ICICI Bank, Kotak Mahindra Bank, Axis Bank, Bajaj Finance, IndusInd Bank and State Bank of India contributing over 90% to gains logged by the Sensex.

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While the Sensex surged 1,075.41 or 2.8% to close the session at 39,090.03 points, the broader Nifty50 gained 326 points or 2.9% to settle at 11,600.20 points. With two-days rally, the Sensex is about 3% away from its June record of 40,267.62.

Kotak Institutional Equities, which raised the FY20 earnings estimates for Nifty50 by 10% from its previous estimate, believes automobiles, banks, capital goods, staples, diversified financial and energy sector to be key beneficiaries of the tax cut. “We expect profit for Nifty50 Index to grow 25% for FY20 and 19% for FY21,” the domestic brokerage said.

Foreign portfolio investors (FPIs), who have been paring their exposure to Indian stocks, bought equities worth $83.54 million on Friday. On Monday, foreign investors bought shares worth $378.4 million, provisional data on bourses showed. Two-day purchase by FPIs has brought down their month-to-date sale tally to about $400 million. Bloomberg data showed.

On the other hand, domestic institutional investors (DII) bought shares worth $ 41.1 million on Monday against Friday’s purchase of $ 422.5 million.

According to UBS Securities India’s Gautam Chhaochharia: “The recent measures together with those announced earlier (including 110bps monetary easing in this cycle till date) will help in arresting the negative feedback loop that was developing in view of the sharp growth slowdown and will help buoy both business and consumer sentiment.”

Interestingly, 22 of the Nifty50 stocks saw double-digit gains in the last two sessions with six of them hitting their highest levels ever on Monday. Among the Nifty pack, Eicher Motors rallied as much as 22.1% in the last two sessions, followed by Bajaj Finance, BPCL, IndusInd Bank and Larsen & Toubro, rising between 19.7% and 17.5%.

On Monday, Bajaj Finance, L&T and Asian Paints surged the most on Sensex, with each adding about 8%.

Morgan Stanley economist Upasana Chachra is of the view that the decision to lower corporate taxes meaningfully is a key structural measure to support India’s growth outlook. In the initial phase, the lower corporate tax rates should help to improve sentiment and the corporate sector balance sheet position.

Further, the cuts should support the business environment, improve competitiveness and help attract foreign capital.

“We expect GDP growth to accelerate by 210 basis points (bps) to 7.1% in QE March-21 from 5% in QE June. We see upside of 50bp vs. our earlier estimate of 6.6% for QE March-21,” said Chachra .

The market breadth, indicating the overall health of the market, was tilted towards the gainers. On Monday, 1,231 stocks advanced on the NSE, compared with 631 stocks sliding and 109 remaining unchanged. On the BSE, 1,627 stocks ended in the green against 981 stocks closing lower. Of the 19 sectoral indices compiled BSE, 13 ended the day in green with BSE Capital Goods gaining as much as 6.6%. That was flowed by Bankex, up 5.7% and BSE Industrials and BSE Finance gaining 5% each.

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