Sensex surges 582 pts to near 4-month high on earnings boost, stimulus hopes

Sensex had gained 192 points on the Diwali Muhurat trading on Sunday.

Led by the gains in battered auto stocks, investors’ wealth, or the market capitalisation of listed firms, rose by Rs 2.73 lakh crore to Rs 152 lakh crore during the day. “Markets buoyed today led by hopes of divestment and tax cuts as a slew of midcaps and under-owned stocks staged a smart upmove,” said S Ranganathan, head of research, LKP Securities.

Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services, said the market witnessed healthy gains on the back of expectations of further announcements by the Centre on the taxation side to spur growth.

Sandeep Nayak, ED & CEO, Centrum Broking, said: “The recently concluded festive season has resulted in a turnaround in the sentiment as the auto sector especially, which was quite stressed, has witnessed improved sales driven by a competitive pricing strategy adopted by many players. This combined with the twin positive developments of the trade pact between the 10 ASEAN members and a proposed review of taxes such as LTCG, STT and DTT before the Budget have added further impetus to sentiment.”

After the correction in the last one year, the surge in auto companies is driven by revival in volume sales in the festive season along with hope of a possible rationalisation of personal income tax.

Vinod Nair, head of research, Geojit Financial Services said: “A strong momentum is seen in the market as healthy Q2 earnings from big corporate and attractive valuation for mid- and small-caps is providing a favourable risk-reward to investors. This positivity is likely to stay in the short to medium term as concerns of the market are fading with tax cut and the government’s intention to come out with more reforms … The clouds over global market is settling down with developments in trade deal and Brexit, while rate cut expectation from Fed will add impetus to India.”

However, a section of marketmen advised caution as the growth rate is yet to show signs of revival. “We will have to wait and see if the news flows turn into a reality. The market will eventually witness a setback if the fundamentals don’t get stronger. The economy continues to show demand recession,” said veteran BSE dealer Pawan Dharnidharka.

Analysts said the result season has also been fairly decent this time around and is not likely to result in any material downgrade in earnings estimates. Further, optimism over US-China trade deal and delay over Brexit decision till January are likely to remove uncertainties in the medium term. Sectorally, BSE auto and metal indices rallied up to 4.25 per cent, followed by energy, industrials and IT indices, rising up to 2.32 per cent. On the other hand, BSE telecom index was the only sectoral loser, 4.39 per cent.

Tata Motors led the rally surging about 17 per cent after the company reported narrowing of losses in the September quarter. Tata Steel, Yes bank, Axis Bank, Maruti Suzuki, Tech Mahindra and TCS rose about 7.09 per cent. RIL ended 2.30 per cent higher after the company on Friday said it will set up a new arm to bring its digital initiatives and apps under a single entity, and infuse Rs 1.08 lakh crore equity into this new unit. On the other hand, Bharti Airtel, Kotak Bank, PowerGrid and SBI fell up to 3.41 per cent.

Meanwhile, the rupee closed with a marginal rise of 6 paise at 70.84 against the US dollar.