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Sensex gains 521 points, GST meet spurs buying

businesspaper Updated: Oct 19, 2016 05:52 IST

MUMBAI: The Bombay Stock Exchange’s Sensex zoomed 521 points on Tuesday due to short covering and bullish sentiment about a crucial GST meeting.

Positive trends in overseas markets also boosted sentiment, although it was unclear how long the trend will sustain, given that there are reports of a possible rate hike by the US Fed.

The BSE Sensex closed at 28,050.88, up 521 points (1.89%), and the NSE Nifty 50 index ended up 158 points (1.85%) at 8,677.90.

“The beginning of the three-day GST Council meet to finalise the tax rate triggered positivity, while there was also some short covering. The outcome of the meeting could be decisive in the near term,” said Jayant Manglik, president, retail distribution at Religare.

The recent Essar Oil sale to Russia’s Rosneft has also driven banking stocks on the hope that more such deals would help banks struggling with high non-performance assets.

On the Sensex, Adani Ports was the biggest gainer, rising 6.3%. ICICI Bank gained for the second consecutive day, closing up 4.6%. Other gainers included HDFC, Tata Steel, L&T and Axis Bank, which closed up 2-3%.

While most Asian markets closed on a high, European markets also largely traded higher.

Even as the equity markets were buoyant on Tuesday, foreign institutional investors have turned cautious on markets like India. Particularly in debt markets, FIIs have pulled out close to $1 billion (₹6,553 crore) from India so far in October. Even in equities, FIIs have divested ₹766 crore this month.

The trend has reversed particularly since the minutes of the Federal Reserve suggested that an interest rate hike in the US was imminent.

Furthermore, the upcoming US presidential elections and uncertainties fuelled by Britain’s decision to exit the European Union have also made investors withdraw from emerging markets like India among others and watch the near-term global developments unfold.

“There is a little bit of anxiety right now about the US elections. The probability of a US rate hike has also gone up. The undercurrent is caution,” said Manish Dangi, co-chief investment officer (debt) at Birla Sun Life Asset Management Company.

However, he doesn’t expect a huge sell-off like that of 2013 when the rupee slumped to a record low after the US Fed first talked of raising interest rates. Rather, fund managers believe that India’s economic strength will continue to attract foreign debt investors to India in the longer term.