The benchmark NSE Nifty closed 1.8% higher at 21,737.60 points, while BSE’s Sensex ended 1.76% higher at 71,941.57, their biggest gains since December 4. The RIL stock climbed nearly 7%, contributing the most to the day’s market gains, as investors turned bullish on potentially higher refining margins.
The RIL stock also got a boost from a Bloomberg report late last week that said Walt Disney Co’s India unit. may now be valued at less than half the valuation the US company previously pursued in a proposed merger with its media business.
Oil & Natural Gas Corp. Ltd (ONGC) was the biggest gainer in the Nifty index, rising 8.9%.
The market was also boosted by strong signals in the Asian markets, after China said it would completely suspend restricted stock lending to stabilize its stock markets. Domestically, 12 of the 13 sectors recorded gains.
Banks bounced back, after disappointing earnings from HDFC Bank Ltd triggered a rout across banking stocks last week. Led by a 1.34% rise in HDFC Bank, financial services, which has the highest weighting among all sectors, added 1.56% after sliding 6.3% in the past seven sessions. Private sector banks have rallied behind domestic institutions buying these stocks as they turn to “value options,” said Manish Jain, fund manager at Centrum India.
“Expectations of rising allocations in sectors such as energy, infrastructure, defense and capital goods… also helped the rally,” said Deven Choksey, managing director at DRChoksey FinServ, referring to the interim budget that will be tabled in Parliament later this . a week
On valuation, the MSCI India index trades at a one-year forward price-to-earnings multiple of 21.45 times, a steep premium to the MSCI Asia Ex-Japan and MSCI Emerging Market indexes, Bloomberg data showed. While this valuation gap between India and its peers is likely to continue, the wealth multiple may be tested if a negative surprise arises in any of these events.
Among individual stocks, Adani Enterprises Ltd jumped about 6% after Cantor Fitzgerald became the first brokerage to cover the stock, giving it an “overweight” rating, saying the conglomerate’s flagship was “too big to ignore.”
In the midst of the winning season, Finance Minister Nirmala Sitharaman will unveil the interim budget on 1 February.
According to Andrew Holland, CEO of Avendus Capital Alternate Strategies, the budget will only indicate the approach the current government will take if it secures victory in the general elections, making it a directional one.
Investors are also looking to the US Federal Reserve’s rate committee, which meets on Tuesday and Wednesday.
The Fed kept rates steady in December, but signaled several rate hikes through 2024. However, geopolitical tensions and the Red Sea crisis are feared to raise crude oil, weighing on the prospects of a rate cut. The Fed is expected to keep rates unchanged this time as well.
“Globally, the upcoming Fed policy stands out as a decisive factor. While a rate cut by the FOMC (U.S. Federal Open Market Committee) is unlikely, investors will eagerly monitor its comments for indications of future rates,” said Vinod Nair, head of research at Geojit Financial Services.
In a report on 29 January, analysts at Kotak Institutional Equities pointed out that Q3 results reinforced the dichotomy that has persisted in the Indian economy for more than a year. “Consumption continues to be weak, highlighting the challenges (low income, high inflation) of low-income households, and investment, especially high-end residential real estate, continues to be strong, emphasizing the sound financial condition of the high-income households,” the report said.
Till January 24 this year, foreign portfolios sold Indian stocks ₹26,842 crore, National Securities Depository Ltd data showed. At the same time, domestic institutional investors bought value stocks ₹19,976.25 crores.
The Nifty VIX has risen 8% so far in January, while the Nifty 50 has remained flat. Investors seem to be cautious and this may lead to some market consolidation ahead of the general election.