The buying was seen across sectors and broader markets traded in line with benchmarks for second straight day, largely driven by domestic factors.
After a steep fall followed by consolidation in early part of the week, the market has broken on upside with full force, as bulls took complete charge of Dalal Street for the second consecutive day on August 9.
Buying has been seen across sectors and broader markets traded in line with benchmarks for second straight day, largely driven by domestic factors.
The BSE Sensex rallied 468.15 points, or 1.25 percent, to 37,795.51, taking two-day gains to over 1,000 points. The Nifty50 climbed 145.80 points, or 1.32 percent, to 11,178.30 at the time of writing of this report.
The market breadth was also in favour of bulls as about three shares advanced for every share falling on the BSE. The Nifty Midcap and Smallcap indices gained more than 1.5 percent each.
The five factors driving the market high:
Optimism on FPI surcharge
Reports that the government could tweak or rollback the surcharge on super-rich has played a big part in the upswing. The controversial tax was one of the main reasons for the outflow of foreign institutional investor (FII) money since July.
Presenting the budget on July 5, Finance Minister Nirmala Sitharaman proposed an increased surcharge of 25 percent for individuals earning between Rs 2 crore to Rs 5 crore annual, and 37 percent for those with an income of for more than Rs 5 crore. It effectively increased the tax rate to 39 percent for those in the Rs 2 crore-5 crore bracket and 42.7 percent for those in the higher bracket.
Given that the Income Tax Act includes association of persons/ body of individual, trusts in the definition of an individual, the increased surcharge will also be applicable to a majority of the foreign portfolio investors (FPI).
Since July, FIIs have sold more than Rs 25,000-crore worth of shares in India.
"Market gets a breather due to the expectation that the government is likely to be lenient on higher surcharge on FPIs, which influenced bears to cover their short positions.
Relief for NBFCs and auto sector stimulus
The NBFC sector, including housing finance companies, reeling under liquidity crunch since second half of 2018, is likely to get a relief package, a senior government official told Moneycontrol.
The package along with measures announced by the Reserve Bank of India (RBI) for NBFCs were expected to have a multiplier effect on the economy, the official said.
In its monetary policy on August 7, the RBI announced a central payments fraud registry and increased to 20 percent the exposure limits for banks to lend to single NBFCs. The previous limit was 15 percent of the bank’s Tier-I capital.
RBI also said that to boost credit flow to certain priority sectors, bank lending to registered NBFCs for on-lending to agriculture (investment credit) up to ₹10 lakh; micro and small enterprises up to ₹20 lakh; and housing up to ₹20 lakh per borrower will be classified as priority sector lending.
Auto, another sector under selling pressure for a year now, is also expected to get some relief from government.
Absence of a fiscal stimulus to beleaguered sectors like autos & NBFCs, and refusal to roll back the surcharge on FPIs are the principal reasons for the plunge in Indian equities. Any move to offer a generous relief on both these counts can lead to a massive short covering by speculators and a strong rally due to buying from FPIs and domestic Institutional investors.
Prospects of lower interest rate and strength in rupee will ease liquidity crunch situation, Nair said.
FM’s meeting with industry leaders
In their meeting with Sitharaman on August 8, corporates demanded a stimulus package of over Rs 1 lakh crore to kick-start investment cycle and revive the economy, which is showing signs of a slowdown. Industry leaders also said that the government had assured them of action soon.
"The economy requires a critical intervention by introducing a stimulus package. We have suggested for a package of over Rs one lakh crore," Assocham president BK Goenka had said after the meeting.
Piramal Enterprises chairman Ajay Piramal said that the industry raised several matters such as reluctance of banks to lend to the industry.
The government also assured that punitive provisions concerning non-compliance with CSR spending would not be pursued, news agency PTI reported.
Recapitalisation of banks, further rate cut
Another reason that boosted sentiment is the likely start to recapitalisation of PSU banks.
Government sources told CNBC-TV18 that bank recapitalisation, announced in the budget, was likely to start September 1. The finance minister allocated Rs 70,000 crore towards bank recapitalisation bonds.
Analysts say the early beginning to recapitalisation along with transmission of rate cuts announced by the RBI in 2019 would boost credit growth and the economy.
After meeting the finance minister, FICCI president Sandip Somany has said transmission of cut in interest rate to consumers by banks is a big issue.
Banks must be encouraged to pass on the benefits of rate reduction to consumers and borrowers. We are hopeful of further rate cut.
Technical factors
The Nifty50 decisively surpassed its near term hurdles like 11,900, 11,000 and 11,100, rallying more than 300 points in two sessions.
The sharp move indicated that bullish bias is expected to continue in coming sessions and the index may move towards its 200-day exponential moving average (11,271 level) in coming sessions, experts feel.
Besides, last four days of consolidation with intraday lows of around 10,800 level, the market appears to have registered a short-term bottom.
MORE WILL UPDATE SOON!!
0 comments:
Post a Comment