MARKET WRAP

Sensex, Nifty jump 1% on buying across pharma, banking stocks

stock-sensex-reuters Representative image | Reuters

Tracking gains across major Asian markets, India's benchmark equity indices ended on a strong note on Friday, to mark the best week in the last four. Buying activity was seen across pharmaceuticals, banks and software services counters, which had been laggards over the last few sessions.

The BSE Sensex surged 322 points or about 1 per cent to close at 34,142.15 levels and the wider NSE Nifty 50 index was up 108 points or 1 per cent at 10,491.05. For the week, the Sensex and the Nifty ended 0.4 per cent higher.

“It was a week of consolidation for our markets as we saw a fragile start on Monday followed by some consolidation for three days and then a good pull back move to conclude at the highest point of the week. The tail end rally was mainly propelled by the heavyweight banking conglomerates along with the beaten down midcap index,” said Sameet Chavan, chief analyst at Angel Broking.

There was sea of green across Asia on Friday, after comments by a Federal Reserve official eased fears of faster interest rate hikes in the US. Hong Kong's Hang Seng, Korea's Kospi, Singapore's Straits Times index and Taiwan Weighted all closed over 1 per cent higher. Japan's Nikkei 225 Stock Average was also up 0.7 per cent and the Shanghai Composite Index rose 0.6 per cent.

Back home, investors were seen buying select bluechip stocks at lower valuations following their recent under-performance.

Tata Steel was the biggest gainer on the Sensex; it closed over 6 per cent higher. Other gainers included Sun Pharma, which rallied over 5 per cent, Dr Reddy's was up 2.3 per cent and ONGC, Bharti Airtel also rose more than 2 per cent.

Buying was also seen in bank stocks, with Yes Bank, Axis Bank, State Bank of India, IndusInd Bank, HDFC Bank and ICICI Bank, all rising 1-2 per cent.

India's equity markets had been under selling pressure following the February 1 Budget announcement, due to various factors including the proposal of long-term capital gains tax on equities and the recent alleged fraud of over Rs 11,000 crore at Punjab National Bank, which had weighed on banking stocks in the past few days.

Foreign institutional investors too have been net sellers of equity this month, while bond yields have firmed up in many markets.

FIIs have sold stocks worth Rs 9,899 crore so far in February, after having invested Rs 13,781 crore in India's equity markets in January, according to data from depositories.

Some analysts still feel that equity valuations remain well above their long-term averages and therefore don't rule out further correction in the market.

“While there has been some correction in the market in February, the market may have further downside in light of the firming up of domestic bond yields,” said Sanjeev Zarbade, vice-president at Kotak Securities.

He advises investors could increase allocation to large-cap stocks “at the expense of” mid-caps, as there is a “higher downside potential” in the later.

Tracking Friday's equity market gains, the Rupee too strengthened against the US Dollar, to close up 0.50 per cent at 64.73, versus previous close of 65.05. The Rupee had closed at a three-month low on Thursday.