India rating upgrade lifts Sensex 236 pts, Nifty Bank to record close; IT pulls Nifty sub-10,300
It was a spectacular start to the market on Friday as the Sensex rallied more than 400 points after Moody’s upgraded India’s sovereign rating to Baa2. However, it lost steam later shedding nearly half of gains in last hour of trade due to extended sell-off in technology stocks and weak global cues.
Even the gap between advances and declines narrowed. About three shares advanced for every two shares falling on the BSE at close, against five shares gaining for every share declining in morning.
Banking & financials, auto, metals stocks and index heavyweights Reliance Industries (up 0.9 percent) and ITC (1.14 percent) helped the market close higher.
The 30-share BSE Sensex gained 235.98 points or 0.71 percent at 33,342.80 and the 50-share NSE Nifty rose 68.80 points or 0.67 percent to 10,283.60.
Moody’s Investors Service today upgraded the Government of India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive, after a long gap of 13 years.
The decision to upgrade the ratings is underpinned by Moody’s expectation that continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term.
“The ratings upgrade did not come as a surprise to me but, it could be for those who were criticizing efforts made by the Modi government to revive the economy,” Ace investor, Rakesh Jhunjhunwala, Partner, Rare Enterprises said in an interview to CNBC-TV18.
Big bull Rakesh Jhunjhunwala sees the economy growing by 7.5-8.0 percent by next year.
Dinesh Jain, Managing Director, AUM Capital feels the ratings upgrade is a recognition of long term growth and is likely to decelerate the selling by foreign investors.
“Moreover many new investors might start looking towards India as an attractive and stable investment destination. Secondly, this might lead to a lower cost of borrowing for corporates planning to raise funds,” Jain said.
The rupee and bond yields also participated in the rally but lost some gains in later part of session. The Indian rupee gained past 65 against the US dollar, rising 70 paise in early trade to hit day’s high of 64.62, but failed to sustain all those gains and ended 31 paise higher at 65.01.
The 10-year government bond yield closed at 7.05 percent (against 7.06 percent in previous session) after trading in a range of 6.93-7.06 percent.
Nifty Bank ended at fresh record closing high, rising 282 points after the rating upgrade. Realty index gained most, up 3.66 percent after increase in carpet area by the government. Auto, Metal, Pharma, FMCG and PSU Bank gained 0.8-1.9 percent but technology stocks corrected sharply on rupee appreciation.
Tata Power was biggest gainer among Nifty 50 stocks, rising nearly 5 percent.
HDFC, ICICI Bank, HDFC Bank, SBI, IndusInd Bank, Tata Motors, Maruti, Vedanta, Yes Bank and Sun Pharma gained 1-2.5 percent.
The Nifty IT index shed 1.5 percent as Infosys, TCS, Tech Mahindra, HCL Technologies and Wipro were down 1-3 percent.
The Nifty Midcap and Smallcap indices gained 1 percent each.
In broader space, LIC Housing Finance, PNB Housing Finance, Can Fin Homes, Repco Home Finance, DHFL, Puravankara, Sobha, DLF, HDIL, Ansal Housing, Allcargo Logistics, Patel Integrated, Snowman Logistics, Gati, Welspun India, REC, JSW Steel, Adani Enterprises, Adani Power, Tata Global Beverages, United Spirits and Radico Khaitan rallied 1-10 percent.
Edelweiss Financial, Petronet LNG and ICICI Lombard were up 1-4 percent after increase in FII investment limit.
New entrant HDFC Standard Life Insurance closed with a whopping 19 percent premium at Rs 344.60 per share against issue price of Rs 290.
On the global front, Asian markets ended mixed while European stocks were flat at the time of writing this article.
