Mumbai: A global stocks rally powered by an impending US-China trade deal and hopes of stable indirect tax collections on the home front drove Indian markets on Thursday, with the benchmark Nifty index closing at a new high.
The Nifty ended at 12,282.20, up 99.70 points or 0.82% while the BSE Sensex closed at 41,626.64, up 320.62 points or 0.78%.
The rally, powered by stocks of companies in the infrastructure, commercial vehicles, cement and metals sectors, was led by the government’s ambitious capex plans and the rise in steel prices with a date set for the US-China deal, said Vinod Nair, head of research at Geojit Financial Services. “Strong expectations from the Union budget, positive data like GST revenue and India factory production at a seven-month high brought a broad-based rally," he said.
Finance minister Nirmala Sitharaman on Tuesday unveiled a plan to invest ₹102 trillion over five years to develop social and economic infrastructure to boost India’s sagging growth.
GST collections stayed above ₹1 trillion for the second straight month in December, bringing relief to policymakers fighting to boost consumption and liquidity in a slowing economy. GST is a major source of revenue and any shortfall will affect the government’s spending capacity.
The Indian rupee weakened marginally against the dollar tracking losses in Asian currencies. It closed at 71.37 to a dollar, down 0.21% from Wednesday’s close of 71.23. Gains of nearly 1% in global crude oil dampened sentiment among traders. Oil prices rose in Asian trade, supported by the progress in US-China trade talks and the political unrest in Iraq. The 10-year government bond yield was trading at 6.503% from its previous close of 6.505%.
European and Asian shares traded higher in their first trading session of the new decade. China’s central bank on Wednesday cut the amount of cash that banks must hold as reserves, releasing around 800 billion yuan to shore up a slowing economy. Aiding sentiment further was the US President’s announcement on Tuesday that the first phase of a trade deal with China would be signed on 15 January.
“For India, the year 2019 was ‘a year of dissonance’ with the economy and equity performance reflecting a clear disunion," said ICICI Securities in a report. “The GDP clearly witnessed a slowdown in growth while the Nifty is at all-time highs. Even within equities, polarization was clearly visible with select large caps ruling the roost with the broader market witnessing a dry spell. Interestingly, the year was also marked by key structural reforms in the form of corporate tax cut and IBC setting the tone for the future." The broking firm said Indian investors continue to await a recovery in key macroeconomic data.
Foreign investors invested aggressively in Indian equities in 2019. According to a Mint analysis, foreign institutional investors invested $14.5 billion in Indian stocks, the highest in the last five years.