Rebounding from a seven-month low hit in the previous session, stock markets on Tuesday rallied by 1.57 per cent as investors bought into shares of companies that were hammered down in the last one week. However, the rupee weakened and breached the 68-mark to 68.06 against the dollar.
The benchmark Sensex opened higher and closed at 26,213.44, a gain of 406.34 points, its biggest single-session rally since December 8 when it had gained 457.41 points. The index had dropped 233.60 points on Monday, hit by talk of higher taxation after Prime Minister’s remarks on the securities market. The NSE 50-share Nifty recovered 124.60 points, or 1.58 per cent, to end at 8,032.85 after moving in a range of 8,044.65 to 7,903.70.
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The market also noted Finance Minister Arun Jaitley’s comments underlining the need to have globally compatible tax rates to broad-base the economy and stated that the government has no intention to impose tax on long-term capital gains on share earnings. The market is expected to remain volatile due to the expiry week and impact on earnings due to demonetisation still remains a big unknown.
The rupee closed at 68.06 per US dollar, down 0.47 per cent from its previous close of 67.74. The currency opened at 67.81 against the dollar and touched a low of 68.08.
“The market witnessed a broad based relief rally today, supported by Finance minister’s comment on competitive tax structure compared to yesterday’s interpretation of possible capital gain tax. The domestic market is expected to be volatile due to expiry week and as uncertainty still prevails over the extent of impact on earnings due to demonetization. Globally investor participation continue to be muted due to holiday mood and lack of any major triggers,” said Vinod Nair, Head of Research, Geojit BNP Paribas Financial.
Sanjeev Zarbade, Vice President, Kotak Securities, said, “The sensex bounced back strongly, recovering some of the lost ground post the selloff from past few days. Even though credit rating agencies have a less positive outlook, a number of global fund managers say that they are buying emerging market assets for 2017 after the beating the sector has taken since the US election in November. Post the correction in equities, the Sensex valuation is now trading at 15 times forward earnings.”
“What you need is a broader base of economy for which you need a lower level of taxation. You need to manufacture products and provide services which are more competitive in character and therefore, your taxes have to be globally compatible,” Jaitley had said earlier.
The recovery in the beaten-down pharmaceutical, FMCG, metal and oil and gas stocks fuelled the rally. Out of the Sensex pack, 29 ended higher. ITC surged 4.02 per cent, followed by Tata Steel (3.23 per cent), Adani Ports (2.87 per cent), ICICI Bank (2.25 per cent) and Lupin (2.13 per cent). FMCG went up by 2.55 per cent, followed by metal 2.46 per cent, consumer durables (2.05 per cent) and healthcare (1.73 per cent).