Sensex surges 259 points on monsoon and earnings hopes

MUMBAI: Indian markets soared to their highest level in 2016 on Thursday, logging fourth straight day of gains, bolstered by a pickup in monsoon across the country and rising hopes of Goods and Services Tax (GST) getting passed in the upcoming session of Parliament. The government’s decision to increase pay wages for government employees also aided the sentiment. Analysts said benchmark indices could gain as much as 2.5% in the near-term. India Meteorological Department (IMD) said the monsoon for the week ending June 29 was 1% above average, helping the deficit narrow. An above-normal monsoon is considered crucial for the revival of the rural economy.

The Sensex rose 259 points, or 0.97%, to settle at 26,999 on Thursday with 28 stocks of out 30 component stocks in the index ending in green. The Nifty gained 83 points, or 1%, to end at 8,287, its highest level in 2016.

In quarter ended June 30, Indian markets also registered its best quarterly gains in two years with the benchmark indices rallying about 7% between April and June. Traders reversed their short positions on Thursday when the June series equity derivative contracts expired as markets have shown strength despite the UK’s decision to leave the European Union. Many traders were short on markets ahead of the UK referendum last week. “The Nifty has formed a sharp ‘V’ shape recovery pattern on the daily charts, while such patterns carry high volatility in the short term,” said Shrikant Chouhan, senior vice president (technical research) at Kotak Securities. “If the Nifty manages to trade above 8,200 level, then we can expect the market rally to continue till 8400 and 8500 levels,” he said.

Consumer stocks continued to witness strong buying moment for second straight day after the longawaited 7th Pay Commission recommendations, which promises a nearly Rs 1 lakh crore bonanza. HUL shares rose 1.8%, Bajaj Auto gained 1.5% and Maruti Suzuki advanced 1.3%.

Market participants are now betting on passage of the GST Bill in the monsoon session of parliament that starts on July 18. “As the feeling of being left-out is going to increase, market participants are likely to chase stocks more aggressively,” said Sandeep Tandon, MD at Quant Capital. “We are more optimistic on India because of domestic factors, particularly good monsoon which is the biggest trigger in the current scenario.”