Mumbai: Indian stocks posted their biggest gain in seven days, snapping a four-day losing streak, after Citigroup Inc. upgraded the country’s equities and as investors hoped that European policymakers will be able to protect banks from the debt crisis.
Reports that the government may announce incentives, including tax subsidies, for exporters also boosted sentiments. The Indian stock markets were shut on Thursday for Dussera even as most European and Asian stock markets gained on signs that Europe will be able to contain the sovereign debt crisis.
The Bombay Stock Exchange’s (BSE) benchmark Sensex surged 440.13, or 2.8%, to end trading at 16,232.54 on Friday, its biggest advance since 27 September. National Stock Exchange’s (NSE) 50-share Nifty index jumped 2.9% to 4,888.05. The BSE Metal Index led gains among sectoral indices after global metal prices rose. Sterlite Industries (India) Ltd rose 8.56% and emerged as the top gainer among Sensex stocks, followed by Jindal Steel and Power Ltd at 8.22%. Tata Steel Ltd gained 4.73% to close at Rs 419.60.
The European Commission is pushing for more capital injection into banks to insulate them from a possible Greek default. European bank stocks rallied after the European Central Bank president Jean-Claude Trichet said the central bank will resume purchases of mortgage-backed securities and also reintroduce year-long loans for banks.
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The government on Friday assured exporters of fiscal support within the next 10 days as demand for goods drop in Europe and the US, PTI reported, citing commerce minister Anand Sharma.
According to brokers, Friday’s rally shows that investors judged Indian equities to be attractive after the Sensex dropped more than 20% this year.
“The selling was potentially overdone. There are 60 companies on the BSE 500 that are trading below a price-to-earnings multiple of seven. It can’t get better than this,” said Hansal J. Thacker, director of Mumbai-based broking firm Lalkar Securities.
On Friday, foreign institutional investors (FIIs) bought stocks worth a net Rs 491.56 crore, while local institutional investors bought stocks worth a net Rs 19.41 crore, according to the provisional data available on the NSE website.
“The rupee is so weak that international investors are finding Indian stocks very cheap,” said Thacker. “Value investments are slowly coming in and once it starts gaining momentum there will be a domino effect. I find this market irrationally low.”
Citigroup upgraded India to “neutral” from “underweight” citing better return on equities and a sharp fall in valuations. It said India will benefit from a fall in commodity prices. The US-based bank said it preferred banking, technology and infrastructure stocks.
However, technical analysts have a different view. According to them, it may be too early to confirm a reversal of the bearish trend.
“As the current trend is down, the bias for break is on the downside. Couple of trading sessions early next week can set the tone for next few weeks. Above 4,960, key resistances are 5,035-5,060- 5,110-5,170. Below 4,830, key supports are 4,760-4,720- 4,675-4,600. A weekly close below 4,600 can open up sharp 300 plus points move on Nifty,” said Jayesh Gala, a technical analyst who runs Tradersplace.in.
Even as the second quarter earnings season is set to start with Infosys Ltd on Wednesday, markets experts think quarterly earnings may have little relevance as global sentiments and liquidity continue to decide market movements.
“Results will be bad, but not as bad as the third or fourth quarter of the last year because the lag effect is yet to play out. IT (information technology) companies may report good numbers, thanks to depreciating rupee. The bigger question is how will be the third quarter results. Right now, there is no liquidity and the global outlook is also pretty bad,” said Mehraboon J. Irani, head of private client group at Nirmal Bang Securities Pvt. Ltd.
The market breadth was positive on BSE, with 1,802 stocks gaining against 984 declines, while 126 stocks remained unchanged.
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