Why Sensex ended 521 points higher today

ICICI Bank extended yesterday gains, rising 10% in two trading sessions

Benchmark share indices ended higher on Tuesday, amid firm global cues, after index heavyweights staged a recovery on short covering while financials rallied after ICICI Bank extended gains for the second straight session.

The S&P BSE Sensex ended up 521 points to settle at 28,051 and the Nifty50 settled 158 points higher at 8,678. Sensex and Nifty registered their biggest intra-day gain since May 25, 2016. In the broader market, both the BSE Midcap and Smallcap indices rose between 1%-2%.

Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services said, "A pull back in US dollar, whetted global risk appetite, sparking rallies in currencies, commodities, and global equity markets. Being in the earning season also helped investors to be stock specific, and ignore recent falls. The GST council meeting that is underway also helped investors to look ahead."

Quarterly earnings from bluechips Reliance Industries (October 20) and Wipro (October 21) would largely influence market trend this week in the absence of any major domestic triggers, say experts.

“Proximity towards the lower end of the 'Falling Channel' coupled with the occurrence of a 'Bullish Harami' raises the expectation of a reversal. Only a sustained move beyond the range of 8,750-8,500 could see sharp momentum; until then expect the index to oscillate within the channel pattern. Further longs could be added on a decisive close above 8,600 which could confirm the mean reversion within the channel,” adds Sacchitanand Uttekar, Equity Technical Analyst at Motilal Oswal Securities.

5 reasons why Sensex soared over 500 points:

GST Council meet

Finance ministry and state finance ministry officials gathered in New Delhi on Tuesday for a three-day meeting that will seek to finalise the main rate of the Goods and Services Tax and pave the way for its introduction next April.

Shares of 10 logistics companies rose upto 5% ahead of the Goods and Services Tax council meeting that begins later today.

Snowman Logistics, Gati, Sical Logistics, Allcargo Logistics, VRL Logistics, Gateway Distriparks and Container Corporation of India gained 1%-7%.

Global markets

European and Asian stocks edged higher with commodities-related stocks leading the gains after prices of major industrial metals and crude oil rose on a softer dollar.

Fed vice Chair Stanley Fischer reportedly warned of the dangers of low interest rates, suggesting they could lead to longer and deeper recessions, making the economy more vulnerable.

Crude oil prices

Oil prices rose today as some analysts said markets might not be quite as oversupplied as suggested by many, with global inventories rising less than expected ahead of the high-demand winter heating season in the northern hemisphere.

Financial stocks

Financial shares including banks, non-banking financial companies (NBFC) and housing finance companies (HFC) emerged as the top gainers rising by up to 7% on the National Stock Exchange (NSE).

Nifty Financial Services index, the largest gainer among sectoral indices ended up 2.75%. While, Nifty Bank and Nifty PSU Bank index gained 2.23% and 2%, respectively.

ICICI Bank, Bajaj Finance, Dewan Housing Finance (DHFL), GIC Housing Finance, Bajaj Finserv, LIC Housing Finance, Housing Development Finance Corporation (HDFC) and Repco Home Finance were up between 3%-6% on the NSE. Bank of Baroda, Union Bank of India, Manappuram Finance, Bharat Financial Inclusion and Rural Electrification Corporation were up 2%-7%.

ICICI Bank extended gains to end near 5% higher. The stock had surged 7% in the previous session after the Essar group on Saturday signed a binding agreement with Russia’s Rosneft, United Capital Partners and Trafigura Group Pte. to sell 98% in its most priced asset, the 20 million tonnes per annum Vadinar refinery and Vadinar port in Gujarat.

According to a Business Standard report, the proceeds of the sale will be used to repay loans of both foreign and local lenders, which was around Rs 88,000 crore, Ruia said.

Bank of America (BofA) maintains "Buy" rating on ICICI Bank with a price target of Rs 320. According to BofA report, a recent large deal is likely to help lower stress on ICICI Bank. Positive catalysts near-to-medium term would be improvement in macro growth, asset quality. BofA believes that the bank has provisioning cushion to deliver +10/25% EPS growth in FY17/18E.

Besides, global rating agency Moody’s said that the draft bill to establish a new regime for resolution of troubled banks in India is credit positive as it will help to enhance overall stability of the financial system.

Midcaps

Mastek soared over 11.5% after the company's consolidated net profit more-than-doubled to Rs 7.7 crore for the quarter ended September 30, 2016 (Q2FY17), despite decline in operational income.

Aarti Industries hit a fresh 52-week high of Rs 740, ended up 5% after the company said the board has approved buyback of shares at a price of Rs 800 per share via the tender offer route.

Indian Hume Pipe surged 20% after the company said the board will meet on October 26, to consider issue of bonus shares to existing shareholders.

Illustration: Uttam Ghosh/Rediff.com