The Sensex on Monday rose 376 points, or 1.8%, to end at 21,134 — its biggest daily gain this year — on expectations that the Reserve Bank of India (RBI) will hold interest rates during its policy review on January 28 and the US Federal Reserve will put off the tapering of bond purchases for some more time. Expectations of low retail inflation, data for which was released after market hours, and solid Infosys results last week also aided sentiments.
The broader NSE Nifty also rose 101 points, or 1.6%, to 6,273.
“India’s equity markets rallied on expectations of lower inflation,” said Rakesh Tarway, vice-President, equity strategy, Motilal Oswal. “Also, there was buying in the entire IT sector, as a result of Infosys posting good numbers last week.”
Retail inflation fell to 9.87% in December from 11.16% in November, in an encouraging signal that rates may not be raised.
IT shares led the 21 gainers on the Sensex as TCS surged 3.9%, Infosys rose 3.3%, ICICI Bank increased 3.1% and ONGC gained 2.9%.
Among the sectoral indices, IT rose 2.9%, Oil & gas surged 2.2%, bankex gained 2% and capital goods rose 1.6%.
The market breadth remained negative as 1,415 stocks fell, 1,327 stocks rose and 134 ruled steady on the Bombay Stock Exchange.
“Markets rose, sharply buoyed by the weak payroll data in US, which re-ignited optimism on the Fed taper programme,” said Dipen Shah, head, private client group research, Kotak Securities.
Overseas investors bought shares worth a net `414 crore on Monday and `68 crore on Friday, according to data from stock exchanges.
Analysts, however, advice caution. “The market cannot move by 376 points on an everyday basis,” said Tarway. “Inflation and interest rates are the future cues that will guide the markets.”
Tarway is bullish on telecom and IT stocks.
The rupee also rose to its highest level in over a month to 61.55/56 against the dollar.
The rupee is at the highest level since closing at 61.25 on December 11.
“It was a strong session for the Indian rupee, thanks to the weakness in the US dollar. Friday’s poor non-farm payroll data led to losses in the US dollar...benchmark indices which closed on a strong positive note also helped rupee to post gains,” said Abhishek Goenka, CEO of India Forex Advisors.