Tuesday turns out to be wonderful day for Dalal Street

Tuesday turned out to be a wonderful day of trade for the Dalal Street, with both Sensex and Nifty closing with gains of over two and half percent each and recapturing their crucial 54,300 (Sensex) and 16,250 (Nifty) levels. The markets’ mood remained up-beat throughout the day and benchmarks fervently gained from strength to strength, as sentiments got a boost with Sanjiv Bajaj, the newly-elected president of industry body CII, stating that the Reserve Bank’s decision to raise benchmark interest rates and the likelihood of a good monsoon will help in containing inflation. CII estimates India's GDP growth to be in the band of 7.4-8.2 percent, depending upon the global oil prices. Traders took a note of report that the commerce ministry’s investigation arm DGTR has recommended for continuation of anti-dumping duty on Chinese solar glass for two years with a view to guard domestic players from cheap imports.

Markets extended rally in second half of trade even as data showing that India’s inflation based on wholesale price index (WPI) surged further to 15.08% for the month of April as against 14.55% in March. The annual rate of inflation was 15.08% in April 2022 as compared to 10.74% in April 2021, due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products etc. as compared to the corresponding month of the previous year. Market participants overlooked SBI Research’s report stated that amidst the continued rise in inflation, it is now almost certain that the Reserve Bank of India (RBI) will raise key policy rates in the June and August policy review meetings, thereby taking it to the pre-pandemic level of 5.15 per cent by August 2022, and added that even after the rate hikes, inflation will take time to moderate in India. Traders also paid no heed towards private report stated that the value of foreign portfolio investors (FPI) holdings in domestic equities reached $612 billion in the March quarter, down 6 percent from the preceding quarter. This was largely on the back of a massive sell-off by foreign investors and a correction in the Indian equity markets.

On the global front, Asian markets settled in green on Tuesday amid expectations of demand revival in top consumer China after Shanghai pledged to gradually ease its Covid lockdown and return life to normal in June. The upside, however, remained capped by uncertainty over the shift in Fed policy and lingering concerns about elevated food and fuel costs. European markets were trading higher, as investors cheered data showing that Britain's unemployment rate fell to its lowest since 1974 at 3.7 percent in the first three months of this year. Separate data showed that the French unemployment rate fell to the lowest rate in 14 years in the first quarter, dropping to 7.3 percent. Besides, Eurostat said Eurozone GDP grew 0.3 percent sequentially in the first three months of the year, up from a preliminary estimate of 0.2 percent and compared with a 0.3 percent rise in the previous quarter.

Back home, agriculture industry related stocks remained in watch with a private report that wheat jumped by the exchange limit to near a record high after India’s move to restrict exports, exposing just how tight global supplies are during the war in Ukraine and threatening to drive up food prices even more. Stocks related to tea industry ended higher even as Tea Association of India (TAI) has flagged the issue of rising coal costs due to acute shortage which is affecting plantation activity as it is an important input for manufacturing in North Bengal.

Finally, the BSE Sensex rose 1344.63 points or 2.54% to 54,318.47 and the CNX Nifty was up by 417.00 points or 2.63% to 16,259.30.  

The BSE Sensex touched high and low of 54,399.42 and 53,176.02, respectively. All 30 stocks advancing on the index

The broader indices ended in green; the BSE Mid cap index rose 2.51%, while Small cap index was up by 2.78%.

The top gaining sectoral indices on the BSE were Metal up by 7.62%, Basic Materials up by 4.26%, Energy up by 4.13%, Oil & Gas up by 3.52% and Telecom up by 3.31%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Tata Steel up by 7.62%, Reliance Industries up by 4.26%, ITC up by 4.15%, Wipro up by 3.97% and ICICI Bank up by 3.97%, while there were no loser on the Sensex.

Meanwhile, the industry body -- Confederation of Indian Industry’s (CII) newly-elected President Sanjiv Bajaj has expressed optimism that the Reserve Bank of India's (RBI’s) decision to raise benchmark interest rates and the likelihood of a good monsoon will help in containing inflation. He said ‘I do believe that we are now in an era of higher interest rates. This will help us bring down inflation, at least a part of that going forward’. He said various factors combined with the hope of a strong monsoon ‘should put us in a better place’ by the second half of the year for policymakers to decide where inflation and interest rates move. Bajaj observed that the rise of inflation has two aspects - demand and supply side.

He said ‘RBI has already started the cycle of taking interest rates up and we should expect interest rates to continue moving up in the coming year. We would expect a clear direction from RBI on how they are going to address interest rates. Hopefully in the next monetary policy review we should be able to hear something to that extent from them.’ CII estimates India's GDP growth to be in the band of 7.4-8.2 percent, depending upon the global oil prices. He further explained ‘global headwinds and inflation will have to be countered with robust policy reforms, both domestic and external sector reforms, to unlock the growth potential of the economy.’

Sharing the vision for the economy, Bajaj said that India has the potential to become a $40 trillion economy by the time it turns 100, in 2047, with milestones at $5 trillion by 2026-27 and $9 trillion by 2030-31. Highlighting the sectoral drivers of growth, he elaborated that manufacturing and services will be the twin engines of growth. The enabling policies of the government, particularly the PLI scheme, are expected to push manufacturing sector's contribution in gross value addition to 27 percent by FY48. Similarly, services, too, will witness its share rising from 53 percent to 55 percent in the terminal year. The contribution of exports to GDP must rise while the investment rate must be stepped up.

The CNX Nifty traded in a range of 16,284.25 and 15,900.80. All 50 stocks advancing on the index.

The top gainers on Nifty were Hindalco up by 9.80%, Tata Steel up by 7.72%, Coal India up by 7.63%, JSW Steel up by 6.34% and ONGC up by 6.12%.

European markets were trading higher; UK’s FTSE 100 increased 67.58 points or 0.91% to 7,532.38, France’s CAC increased 83.87 points or 1.32% to 6,431.64 and Germany’s DAX increased 210.40 points or 1.51% to 14,174.78.

Asian markets settled in green on Tuesday, as the market sentiments got bolstered after Shanghai marked three consecutive days of zero community transmission and as the government plans to reopen the markets gradually. Chinese economic data had tumbled this month in the wake of gruelling covid restrictions. Japan’s Nikkei finished higher for third straight session with the rally in technological and property sector. Meanwhile, optimism over Chinese market re-opening supported the sentiments. Shanghai ended moderately higher, amid optimistic reports that Chinese government will formulate policy measures to stem manufacturing and services sector also lifted the equity investments.

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