Sensex climbs 485 points! Nifty reclaims 8,000 mark on hopes of economic recovery and good monsoon

MUMBAI: Stocks soared to 2016 highs and Nifty reclaimed the 8,000 mark on rising hopes of an economic recovery and the return of heavy monsoon rains after successive droughts.

Index heavyweight and capital goods major Larsen & Toubro recorded the best single-day gain in seven years as its fourth quarter performance kindled hopes of an improvement in domestic demand conditions for construction and heavy engineering goods. Fresh long positions were created in derivatives market for the June series. Traders with short positions were forced to cover up their positions as they cut losses in F&O segment.

The Sensex consolidated above the 26,000 mark and climbed 485 points, or 1.88%, to close at 26,366, its highest level of 2016. The Nifty surged 134 points, or 1.70%, to end at 8,069. The Nifty was last above 8,000 in November 2015.

“There is plenty of money outside for Indian markets and we expect the broad markets to move more aggressively,” said Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services. “We would say most of the negative catalyst are priced in by stock markets, while some of the positives we see from here onwards are further reduction in interest rates and corporate earnings beating the street expectations.”

L&T contributed 33% of the gains in Sensex on Thursday and the stock rallied 14% to Rs 1,472. It is India’s largest capital goods company and the results raised hopes that a fledgling economic recovery was gathering pace.

Recovery hopes also boosted banking stocks with State Bank of India, which reports its results on Friday, rising 4.9% to Rs 183. Axis Bank rose 3.3% to Rs 519, ICICI Bank advanced to Rs 240.

Banking stocks contributed onethird of Sensex’s gains. Global credit rating agency Moody's Investors Service said in a report that the new bankruptcy code will address several key inefficiencies for asset resolution in India, which is credit positive for Indian banking sector.

“I think the bankruptcy code is going to change how banks and financial sector will work in this country. This will also change how industry will work,” said Rashesh Shah, Edelweiss Group. Crude prices reclaimed the $50-per-barrel mark for the first time this year after US data showed a decline in stockpiles. This also aided global market sentiments.

“The market upmove is driven by positive expectation on the monsoon and many companies in specific sectors declaring reasonably better-than-expected numbers,” said Ravi Gopalakrishnan, head of equities at Canara Robeco Mutual Fund.

Private sector weather forecaster Skymet raised monsoon forecast to 109% of the long period average (LPA) from the earlier figure of 105%. The agency also predicted that the total area under the cultivation of kharif food grains would increase by 15-20% in 2016, as compared to the previous year. The total production was expected to be around 129-130 million tonnes, it added.

Nifty rollover or carry forward of trading positions to June series was at 73%, which is almost in line to 3-month average of 74%. The Nifty open interest or outstanding positions is unchanged at Rs 16,450 crore at the start of next series.

Total market rollover were seen at 80%, which is higher compared to 3-month average rollover of 77%. The marketwide futures open interest for June series, is Rs 77,200 crore against Rs 74,700 crore seen at the start of August series.

Foreign institutional investors (FIIs) bought stocks worth Rs 581 crore while domestic institutional investors (DIIs) purchased stocks worth Rs 685 crore, according to provisional exchange data. Traders are pricing in negative news flows from the global front that includes possible interest rate increase by the US Federal Reserve in the June 14-15 policy meeting and the UK referendum on June 23.

“The market will not be much impacted by possible interest rate hike if there is good distribution of monsoon rainfall and the pace of earnings growth improves,” said Neelesh Surana, chief investment officer - equities at Mirae Asset Management.