Tech bounce lifts indices and sentiment

Mumbai: Indian equities jumped over 1% on Monday a day before the Union Budget, with beaten-down technology stocks leading the gains. Local stocks were mirroring the strength in global markets triggered by the rebound on Wall Street on Friday. The Sensex ended up 752.26 points or 1.32% at 57,952.49 while the Nifty closed 237.90 points or 1.4% higher at 17,339.85.

"The whole focus will be on fiscal balance and whether it will be a growth-oriented Budget," said Sunil Singhania, founder, Abakkus Asset Manager. "The near-term trend is likely to be directed by the global market rather than the Budget."

Foreign Portfolio Investors remained sellers, offloading shares to the tune of ₹3,624.5 crore while Domestic Institutional Investors bought shares worth ₹3,648.65 crore.

The perception of near-term risks in the market eased a bit with the Volatility Index or VIX declining 6.1% at 21.95. But the measure is yet to flash that the market risks have receded completely with concerns over the US Federal Reserve's hawkish tilt keeping investors on the edge.

While the Sensex and Nifty have fallen 7% from their all-time highs of October last year, analysts said market valuations are still rich.

"We remain sanguine on India's economic outlook, but valuations are still not in a comfort zone, especially as the risk- free rate is rising," wrote Mahesh Nandurkar and Abhinav Sinha, analysts at Jefferies in a note to clients.

The Nifty now trades at an estimated Price to Earnings of 20 times, an 8% premium to its 5-year average and 21% above its 10-year average, the brokerage said. "The broader markets also haven't corrected significantly, trading 41% above average," said Nandurkar and Sinha. "Our summary of Nifty100/sector leader stocks shows that 46%/61% stocks are at a premium to their historical 5/10-year average valuations."

On Monday, three out of the top five Sensex gainers were information technology stocks as investors lapped up the beaten-down names after the recent sell-off. The Nifty IT index had fallen in eight out of the last nine trading sessions tracking a sell-off in tech stocks globally on US interest rate hike worries. The index ended up nearly 3% on Monday.

Tech Mahindra, Wipro, Bajaj Finserv, Infosys and State Bank of India gained 3-5%. Of the 30 Sensex stocks, only three ended in the red, indicating that bulls had a firm grip on the market. IndusInd Bank was the top Sensex laggard, declining 3.5%.