Favourable domestic cues along with higher global markets helped Indian stock market benchmarks Sensex and Nifty rise for the third straight day. The Sensex ended 147 points higher at 37,641 while Nifty settled 0.43% higher at 11,105, driven by gains in banking, auto and energy stocks. Some selling in IT stocks capped gains. The Reserve Bank of India on Monday approved a record ₹1.76 lakh crore payout to the government, boosting the Centre's coffers at a time when it is under pressure to provide a stimulus to the economy. The rupee and bond markets also cheered the higher RBI payout.
The market breath was also strong with BSE midcap and smallcap indices rising 0.53% and 1.6% respectively.
Among the Sensex stocks, Tata Motors surged 9% while Tata Steel, NTPC, IndusInd Bank, Vedanta and M&M gained between 2% and 4%. Frontline IT stocks were under pressure today with Infosys, Tech Mahindra and TCS declining between 1.5% and 2.5%.
"The recent announcement made by the finance minister and the outcome of RBI board meet are definitely positive for the Indian markets. This is likely to lift domestic sentiments in the near term. Going forward, the market participants would keep a close watch on currency movement and upcoming Q1FY20 GDP data. Globally, trade tensions between US-China is likely to induce volatility into the Indian markets. Hence, it would be prudent to stick with quality names while investing or trading," said Ajit Mishra, vice president for research at Religare Broking.
The RBI's transfer of ₹1.76 lakh crore to the government included ₹1.23 lakh crore as dividend and ₹52,640 crore from its surplus capital. The dividend payment includes ₹28,000 crore already transferred to the government as interim dividend in February.
This ₹1.76 lakh crore payout is much higher than the government’s budget estimate of ₹90,000 crore as dividend from the RBI this year. The RBI pays dividends to the government every year, based on the profits from its investments and printing of notes and coins.
The record transfer of dividend and surplus capital will ease the fiscal pressure of the government, say economists.
The rupee today strengthened to 71.60 today as compared to its previous close of 72.02.
Finance Minister Nirmala Sitharaman last week announced various steps to spur growth including upfront capital infusion of ₹70,000 crore in state-run lenders.
Moody’s Investors Service's vice president for Sovereign Risk Group, William Foster, said: "We expect the measures to provide some support to investor and business sentiment, and the acceleration of the capitalization of public sector banks to help improve the provision of credit and transmission of monetary policy easing. However, we also expect domestic and external headwinds to persist over the course of the year, resulting in 6.4% real GDP growth in the fiscal year ending in March 2020, before growth picks up to 6.8% next year."
Global markets were mostly higher today as investors turned cautiously optimistic about the prospects of a breakthrough in the US-China trade war. US President Donald Trump on Monday flagged the possibility of a trade deal with China and said he believed Beijing was sincere in its desire to reach an agreement. (With Agency Inputs)