While the monsoon worries continue, stock markets made a comeback on Thursday with support coming in from both domestic and global fronts as the realty sector led the rally. The draft Direct Tax Code, good industrial production data and an upsurge in the global markets contributed to the steepest advance of the benchmark index, Sensex, since May 27 this year.
The Bombay Stock Exchange (BSE) 30-share sensitive index gained 498.33 points or 3.32 per cent at 15518.49 and the broader National Stock Exchange (NSE) index, 50-sahre Nifty gained 147.50 points or 3.31 per cent at 4605. Sensex touched the days high of 15545.13.
The markets had many positive cues to justify its up-move, said Alex Mathew, Head, Research Centre, Geojit BNP Paribas Financial Services. The U.S. markets had rallied the other day as the Federal Reserve had left the interest rates unchanged as they were more optimistic about the economy than before and ruled out any need for cutting the interest rates further.
In the domestic front, the draft direct tax code unveiled by the Finance Minister gave an impetus to market sentiment. Many positives for the markets like the proposal for scrapping the Securities Transaction Tax, scrapping the distinction between long-term and short-term capital gain tax and the like which actually rejuvenated the market participants even though these proposals will actually get implemented in the year 2011, said Mr. Mathew. In the early afternoon session, inflation rate for the week ended August 1 came in and it was at (-)1.74 per cent as against (-)1.58 per cent, which helped the realty stocks to rise.
The positively trading European markets and the U.S. index futures gave more boosts to the markets in the afternoon session. For the moment, though monsoon worries are still there, markets moved up on cues form global markets, said Himanshu Varia, Head-Institutional Sales, Asit C. Mehta Investment Intermediate. Mr. Varia also said that investors started buying at lower levels on Wednesday itself, which reflected in Thursdays trading.
All sectors moved up: Realty was up 6.86 per cent, metal 5.57 per cent, automobile 4.41 per cent, banks 4.34 per cent, consumer goods 4.20 per cent and FMCG 3.94 per cent.
Other broader indices also ended in the positive territory. BSE midcap gained 194.36 points or 3.59 per cent at 5608.89; smallcap 252.12 points or 4.11 per cent at 6387.05 and BSE-500 193.65 points or 3.38 per cent.
The rupee regained over half of its overnight losses against the dollar on Thursday and closed higher by 26 paise at 48.11 against 48.37 on Wednesday.
In lacklustre trading at the interbank foreign exchange market, the rupee resumed higher at 48.19/20. Later, it was trapped in a narrow range of 48.0650 and 48.2000 before ending at 48.10/11.
A sharp rally on the local bourses following 7.8 per cent growth in Indias industrial output in June and the governments proposal to initiate radical tax reforms through a new direct tax code boosted rupee sentiment, a forex dealer said. A weak dollar overseas against its major currencies also helped the rupee rise.
The Reserve Bank of India, however, fixed the reference rate for the dollar at Rs. 48.14 and for the euro at Rs. 68.64. The rupee premiums on the forward dollar ended slightly better on fresh paying pressure from banks and corporates.