Markets spurt as India means business, talks more reforms

A day after India made the top 100 in the World Bank’s ‘ease of doing business’ list, benchmark indices Sensex and Nifty scaled new highs in the hope that a higher ranking could raise the country’s creditworthiness and bring in more foreign money.

Wednesday’s market rally was the second significant rise in markets in just over a week driven by good news of government reforms.

The fact that the benchmark indices were trading at their highest price-to-earnings multiples — last seen during the 2000 dotcom bubble and the run-up to the 2008 financial crisis — has not inhibited traders.

The Sensex closed at 33,600, up 387 points or 1.17 per cent. The Nifty index closed at 10,440, up 105 points or 1.02 per cent. The gains in both indices were supported by other Asian markets, including Japan’s Nikkei, which gained 1.86 per cent, and Hong Kong’s Hang Seng, which rose 1.23 per cent.

While Reliance Industries, HDFC Bank and a few other stocks have been the star performers in rallies this year, traders are now pushing up even neglected counters such as Bharti Airtel and PSU banks on hopes of a turnaround in the business cycle.

“An improvement in India’s ranking on the ‘ease of doing business’ index may bring in more FDI flows,” said Arun Thukral, MD & CEO, Axis Securities. “It has cheered the markets on hopes that we will see a pick-up in industrial activity, capital expenditure and job creation. Also, the earnings season so far has been better than expected, and concerns of business disruption due to the Goods and Services Tax (GST) have been put to rest with companies reporting flat or positive volume growth.”

Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion, said on Wednesday that the Centre was working with the World Bank to recognise over 200 reforms that could propel India into the top 50 in the list. Such statements from government officials have been the chief cause of the rally in markets this year, analysts say.

Provisional figures showed that Foreign Portfolio Investors (FPIs) were net buyers of stocks worth ₹1,038 crore in the cash segment and ₹390 crore in the derivative segment, mainly index options. Domestic institutional investors, who have been supporting markets in 2017, sold stocks worth ₹667 crore in the cash segment.

Bharti Airtel was among the day’s biggest gainers: its scrip rose 8 per cent, its largest gain in a single day so far this year. Among others, SBI, ICICI Bank, HDFC and Axis Bank rose by 2-4 per cent.

The rupee too gained against the greenback, closing at 64.59, up by 15 paise over its previous close of 64.74. Market players will watch the US Federal Reserve and the Bank of England’s meeting for further cues. While the Fed is expected to hold steady, the BOE is likely to hike key interest rates.

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