Sensex, Nifty log biggest gains in six months on value buying
Investors opted for short-covering and value buying, betting there may be no contagion risk from serial defaults at IL&FS
Mumbai: Benchmark equity indices Sensex and Nifty logged their biggest gains in more than six months on Wednesday, recouping some losses from last week’s carnage. Investors opted for short-covering and value buying, betting there may be no contagion risk from serial defaults at Infrastructure Leasing and Financial Services Ltd.
BSE’s 30-share Sensex rose 1.35% or 461.42 points to 34,760.89, while National Stock Exchange’s 50-share Nifty climbed 1.54% or 159.05 points to close at 10,460.10 points. It was the biggest gain for both indices since 5 April.
Since the start of last week through Tuesday, the Sensex has lost 5.32% or 1927.67 points.
Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. Ltd, attributed Wednesday’s recovery to partly bottom-fishing.
“Government has soothed investor sentiment and confidence is boosted that there will be no contagion from the IL&FS crisis,” Shah said.
“SBI (State Bank of India) increasing the securitization target, NHB (National Housing Bank) increasing the refinance limit (and) such liquidity enhancing measures are assuring that there will be no systemic liquidity crisis,” he added.
SBI on Tuesday said it will triple its target of buying standard loans from non-banking financial companies (NBFCs) to up to ₹45,000 crore in FY19.
NHB has increased the refinancing limit to ₹30,000 crore from the existing limit of ₹24,000 crore in order to address the liquidity crisis in the housing finance industry, which would, in turn, increase the availability of funds for housing finance companies.
These steps boosted NBFC stocks.
Dewan Housing Finance Corporation Ltd jumped 16.08% and Edelweiss Financial Services Ltd nearly 10%, while Indiabulls Housing Finance Ltd rose 3.61%. “Things are fine as of now. Valuation-wise, we are in the fair value zone. For many stocks across large and small cap, we are trading below 10-year historical average on price to book basis,” said Shah.
“Oil and election will be a bigger influencer for the market going forward,” he added.
The underlying tone, however, was cautious.
“We maintain our cautious view on the Indian markets in the near term, as volatility is likely to remain high,” said Jayant Manglik, president, Religare Broking Ltd.
Foreign institutional investors (FIIs) have sold a net of $3.5 billion of shares in the year so far, while domestic institutional investors (DIIs) have bought a net of ₹91,064.32 crore of Indian equities in the same period.
“Focus of market participants would shift to the corporate earnings season and domestic macro data like IIP (index of industrial production) and CPI (consumer price index)/WPI (wholesale price index) inflation which are scheduled over next 1-2 weeks, as it would dictate the further course of markets,” added Manglik.
Advancing shares beat those declining in the ratio of 3.4:1 on BSE. All sectoral indices except the BSE IT index, and BSE Tech index closed higher. BSE Realty index and BSE consumer durables index were the top gainers, rising 4.44% and 3.77% respectively.
Financials contributed the most to the gains for Sensex. Private lenders ICICI Bank Ltd and Axis Bank Ltd gained 4.18% and 6.62% respectively, while SBI rose 5.88%.
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