The BSE stock exchange's benchmark index, the Sensex, rose a little over one per cent on Friday, a third straight weekly gain. Stocks rose amid a positive sentiment across global markets, on signs of recovery in corporate earnings and hope of additional stimulus by central banks. The markets are closed on Monday for the Independence Day holiday. Foreign institutional investors (FIIs) on Friday bought shares worth Rs 1,200 crore, taking their past month's tally to Rs 17,200 crore ($2.5 billion).
The Sensex ended at 28,152.4, up 293 points or 1.05 per cent, the highest in a week. The National Stock Exchange’s Nifty added 80 points or 0.9 per cent to 8,672.15. The gains were led by banking and automobile stocks. State Bank of India gained 7.2 per cent, the most among Sensex companies, after it reported a smaller than expected increase in bad debt in the June quarter.
Shares of Tata Motors gained 2.6 per cent and Mahindra & Mahindra added two per cent, after the Supreme Court lifted the partial ban on sale of new diesel cars in the Delhi region.
Most Asian markets were up on Friday after all three major indices in the US touched record highs and weak economic data in China raised hope of policy easing.
“There’s some degree of optimism on emerging markets (EMs) as fears of a slowdown in China and elsewhere have now dissipated. The external environment is quite benign, with the (US) Federal Reserve keeping interest rates lower for longer and prospects for additional easing from other major central banks providing further support,” said William Jackson, a London-based economist at Capital Economics. Easy liquidity conditions globally have seen capital move into risker assets in EMs. Since March, foreign investors have put a little over $8 billion into the Indian stock market. The Nifty is up 24 per cent since March.
ICICI Securities in a recent note said it expected the trend of easy liquidity to “sustain, albeit with some volatility on the back of relative attractiveness of EM assets to DM (developed market) assets, accommodative global monetary policies, a long drawn and slower than expected US rate hike cycle, a conductive domestic macro environment and pro-growth reforms”.
FIIs have been net buyers for 27 days in row, the longest stretch since Prime Minister Narendra Modi came to power in May 2014. Above-average rain after back-to-back droughts has improved the outlook on company earnings and global central banks remain supportive of growth, say experts
“This rally has been been driven by liquidity and every small fall is being bought into aggressively. The gush of liquidity has been strong. Good monsoon rain, passing of the goods and services tax Bill and company earnings that are in line with expectations have helped,” said Kaushik Dani, fund manager, Karvy Stock Broking.
Twelve of the 22 companies on the Sensex that have reported June quarter results have met investor expectations. The Sensex is valued at 16.4 times the projected 12-month profits, near the highest since April 2015. A gauge of EMs is valued at a multiple -of 12.6.