Mumbai: Expectations of more stimulus by the government to lift demand ahead of the festive season fuelled a relief rally on Friday. Benchmark indices recouped losses and climbed more than 2%, while buying in global peers improved sentiment among investors. The BSE Sensex ended at 37,388.66, up 835.06 points or 2.28%. The Nifty was at 11,050.25, up 244.70 points or 2.26%.
Markets in other parts of the globe mostly ended higher. Equities in Korea, Japan and Australia edged higher.
The relief rally was based on the hope of more stimulus measures by the central government, said Vinod Nair, head of research, Geojit Financial Services.
“Despite the rally seen today, the market is expected to remain volatile and directionless in the absence of solid triggers. Global cues will continue to be in focus as resurgence in virus cases around the world leads to more restrictions and more pressure on economic recovery,” he said.
Media reports suggested that the government is preparing another round of stimulus measures to boost consumption and demand as the economy is reeling because of the disruptions that have resulted from the covid-19 pandemic.
Rating agency Standard and Poor’s (S&P) on Friday reaffirmed India’s sovereign rating at the lowest investment grade with a stable outlook. The rating agency expects India’s gross domestic product (GDP) to contract 9% in FY21 before bouncing back to grow at 10% in FY22.
It, however, said that worsening weak fiscal settings will constrain the government’s ability to aid the economy.
In the week ahead, markets will watch out for the Reserve Bank of India’s (RBI’s) monetary policy review. The central bank is widely expected to continue prioritizing growth over inflation in its commentary and maintain an accommodative policy stance. From the prospective of the bonds market, RBI’s view on inflation will be a crucial factor to watch out for. Markets will also look out for some clarity on the central bank’s plan to monetize the rising pile of government debt.
Meanwhile, the Indian currency closed at 73.61 up 0.39% against the dollar on Friday.
“The rupee rose in the first half of the session following recovery in domestic equities but gains remained capped as the dollar strengthened against its major crosses. On the domestic front, focus will be on the fiscal deficit number that will be released next week and widening deficit could keep the rupee weighed down,” said Gaurang Somaiya, forex and bullion analyst, Motilal Oswal Financial Services.
Foreign institutional investors have started dumping Indian equities, selling $220.83 million shares so far in September.
FIIs have been consistently buying Indian equities with net investment of $11.44 billion over the last five months.
However, domestic institutional investors, which have been on a selling spree, have slowed down the pace. DIIs were net sellers of ₹1,418.01 crore worth of shares in this month so far.