S&P BSE Sensex registered its sharpest seven–day rally in the last five-and-half years to gain over 1,900 points, or 7%, on Friday after last week’s surprise interest rate cut by the Reserve Bank of India, followed by a better-than-expected quantitative easing (QE) programme announcement by European Central Bank (ECB) President Mario Draghi on Thursday.
On Friday, the S&P BSE Sensex surged 273 points to close at 29,278.84, and has rallied 1,932 points in the past seven trading days since January 15, 2015 reporting its highest rise since May 2009. The NSE CNX Nifty, which closed at 8,836 levels on Friday, has surged 558 points during the period.
Earlier in 2009, between May 15 and 19, in three trading sessions, the Sensex had gained 2,429 points after the Congress led UPA-II came back into power. In 2013, in five trading sessions between September 4 and 11, the index rallied 1,762 points on back of net buying of Rs 5,225 crore by the FIIs.
“ECB’s massive quantitative easing (QE) bodes well for fighting the deflationary forces in Euro region and taking growth to its intended levels. Considering US economy’s recovery, the ECB’s QE package has increased the optimism over improvement in global demand, albeit at a slow pace. Also, apart from QE’s effects on global economy’s health, it would dictate liquidity at a time when US is edging toward a divergent view,” said Vinod Nair, head of fundamental research, Geojit BNP Paribas Financial Services.
“The QE package size have surprised the markets and EMs are placed well to receive the same. Having said that, two more crucial events are awaited, Greek vote and Fed meet. Once these events are past us, India is better placed to factor budget expectations and reforms,” he adds.
One of the notable features of the week was the stark under-performance of the mid-caps the S&P BSE Mid-cap index gaining 2%, while S&P BSE Small-cap index moved 1.5% during the period. Between January 15 and January 21, in six trading days, foreign institutional investors (FIIs) have pumped in Rs 7,206 crore in the Indian equity markets, data suggests.
Rate sensitives rally
During the current rally, stocks from interest rate sensitive sectors such as real estate and banking have outperformed the market with their respective indices gaining 12% and 8% respectively, while the capital goods index gained 9% during the period. Consumer durables, automobiles, power, metal, and healthcare indices also moved higher between 6-7%.
“I think that the markets are still celebrating the rate cut by the RBI. ECB’s move has added to the euphoria. The outcome of elections in Greece can change the market’s complexion dramatically. Moreover, there is an FOMC (Federal Open Market Committee) meeting on January 27 – 28. I think one should wait for these events to happen before taking a fresh investment call,” said U R Bhat, managing director, Dalton Capital Advisors.
Among stocks, DLF, D B Realty, Housing Development and Infrastructure (HDIL), Prestige Estates and Indiabulls Real Estate from the real estate sector, India Cements, Shree Cement and Prism Cement from the cement sector have rallied more than 15% each.
Axis Bank, Sun Pharmaceutical Industries, Larsen and Toubro, Tata Motors, Tata Power and Bharti Airtel from 30-share S&P BSE Sensex have gained between 10-12% during the period.