The benchmark Sensex of the Bombay Stock Exchange on Friday spurted by 338 points, or 2%, its biggest single-day gain in two months, after the European Central Bank unveiled a new plan to buy bonds, leading to a surge in capital inflows.
The ECB’s programme is aimed at keeping the short-term borrowing rates of countries such as Italy and Spain at manageable levels, giving them time to enact debt reduction measures and economic reforms.
Tracking overnight gains in US stocks and early Asian cues, the Sensex closed at 17,684, with Tata Steel, ICICI Bank, Tata Motors, L&T, Hindalco and RIL leading the rise.
Friday saw a rally in shares of around 1,800 companies on hopes of a revival in the global economies in the short run.
The Nifty of the National Stock Exchange also rose by 104 points, or 2.0%, at 5,342.
“The ECB will buy unlimited amount of bonds if countries request it to do so subject to conditions,” said Dipen Shah, head, private client group, research, Kotak Securities. “This means that the prospect of defaults is limited to the European Union. This was why the Indian as well as global markets were positive on the back of the bond-buying decision.”
Sentiments were further boosted by a better-than-expected US private sector jobs data for August and China’s statement of a schedule of new infrastructure projects.
Asian indices, including Japan, China and Korea, closed up 1-4%. Europe was also trading up 1%.
Industry experts also said that the scope of the Indian economy growing has increased with monsoons beating expectations and the shortfall being only about 10%.
Capital stocks were among the best performers on the back of foreign funds flow followed by real estate and metal stocks.
Talking about the Nifty’s weekly outlook, Rakesh Goyal, senior vice-president, Bonanza Portfolio said: “For the coming week, if Nifty sustains above 5,350, likely upside target shall be 5,400-5,450. On the other hand, if it goes below the 5,300 level, further selling pressure is likely up to 5,280-5,250.”
The BSE and the NSE will remain open on Saturday for one-and-a-half hour from 11.15 am to 12.45 pm, as the BSE is testing its disaster recovery site.