Shares climbed, pushing the Sensex to a record, in a surge led by industrial equipment makers. The benchmark last closed at an all-time high on May 17. The benchmark climbed 1.5% to end the session at 30,750.03 in Mumbai, while the NSE Nifty 50 Index rose 1.6%. Larsen & Toubro (L&T), the nation’s largest engineering company, rallied 5% to its highest close since August 2015 as CNBC-TV18 reported earlier Thursday that it will start the sale of its switch-gear business.
The minutes from the US Fed’s May 2-3 policy meeting, according to traders, were in large part responsible for the sudden spike in enthusiasm. The Fed signalled that it will wait for more data for a rate hike. This prompted investors to cover their short bets as Thursday was also the last day for May futures and options contracts.
Thursday’s Sensex rally was the biggest since March 14 when it surged 496.40 points. The gauge had lost 269.33 points in the previous two sessions.
While some index fluctuation was expected on Thursday as derivatives contracts for the month of May expired, the India VIX Index, a gauge of expected stock-price swings, tumbled 12% to the lowest on record going back to 2007.
“Today’s movement was very surprising and even as we may need more data to know specifics, the one thing that it clearly indicates is the bullish undercurrent,” said Hemen Kapadia, a Mumbai-based senior vice-president for institutional equities at KR Choksey Shares & Securities.
Traders rolled over 74% of their futures linked to Nifty compared with a six-month average of 69% on expiry, according to data compiled by Bloomberg. The roll cost, or price to replace May futures with June, was 51 basis points versus a six-month mean of 34 basis points. Contracts end on the last Thursday of every month in the country.
Eleven of the 13 sector gauges compiled by BSE rallied, led by the S&P BSE Capital Goods Index’s 3.5% advance. The S&P BSE Healthcare Index was the worst performer, extending its seven-day fall to more than 9%. It is the only sector gauge that has so far declined in 2017.
Nifty’s trading volume was 60% higher than its 30-day average. The 50-share NSE Nifty again hit off the key 9,500 to scale the session’s high of 9,523.30 before ending at 9,509.75, up by 149.20 points, or 1.59%.
“The market rebounded from previous fall as FOMC minutes shared its concern over the hike in US rate in future due to slowdown in economic growth, which is positive for emerging markets,” said Vinod Nair, head of research, Geojit Financial Services.
A spell of intense buying interest in late afternoon trade propelled the markets higher as participants carried forward their positions to the June series of derivatives.
Positive earnings by some companies perked up sentiment.
NSE’s equity derivative turnover hit a record high of Rs 12.6 lakh crore, overtaking the previous record of Rs 11 lakh crore on September 29,2016. Experts said a 1.5% gain in the broader index on the day of expiration, after two successive days of weak closing for the Nifty, saw huge participation in index options that itself recorded a turnover of over Rs 10 lakh crore, led to this new record.
The rally in domestic equities was largely in line with the upmove at other Asian markets, mirroring overnight gains on Wall Street, as minutes from the Federal Reserve’s latest policy meeting favoured a cautious approach to raise borrowing costs.