Hope is fuelling the rally for India’s key benchmark indices Sensex and Nifty, which touched six-month highs on Monday after dates for general elections were announced on Sunday.
India-Pakistan border tension had equity traders on edge but announcement of elections reassured investors that the situation between the arch rivals may not escalate further, at least in the near term. Also, talk of stimulus by Beijing after last Friday’s brutal fall in Shanghai Composite index, yet again came to the rescue of global markets. The Sensex rose 383 points, or 1.04 per cent, to reclaim the 37,000-mark. The broader index Nifty index gained 132 points or 1.2 per cent to close at 11,168.
Clear majority hopes
Monday saw the Sensex close at the highest level since September 19 last year when it had ended at 37,121. After India’s military response to the Pulwama terror attack, stock markets are now expecting a clear majority for the BJP-led National Democratic Alliance (NDA) in the 2019 Lok Sabha polls and hence a stable political regime rather than a hung Parliament, analysts told
The Election Commission on Sunday announced the dates for general elections that will be held over April and May with final results to be declared on May 23.
“The general perception of economic slowdown in the past couple of years could be offset by India’s strong measures against Pakistan in the recent past involving its action post incidents of terror attacks on Indian military air base, and recently Pulwama. Worry over hung Parliament is less now on traders’ minds,” the head of institutional equity desk at a Mumbai brokerage house said.
Fiscal deficit target
A sharp pre-Budget slide in the stock markets was halted on the back of government’s fiscal deficit target of 3.4 per cent in the Budget against an expectation of a much steeper number.
While negative data from China on the trade and economy front has kept global markets on tenterhooks for the past few weeks, the country’s central bank on Sunday attempted to calm frayed nerves.
China’s central bank on Sunday pledged further support to a slowing economy by spurring loans and lowering borrowing costs.
China’s bank lending data show sharp fall in new bank loans which was worse than expected in February and money supply growth too missed the target. PBoC Governor Yi Gang on Sunday said there was still some room for reserve requirement ratio (RRR) cut although the amount of room is less compared with a few years ago and there were also comments from PBoC Deputy Governor Pan Gongsheng that they will keep liquidity ample and set up counter cyclical adjustments. Another official noted that February money supply data is normal and in line with historical trends.
On Friday, the Shanghai Composite index was down over 5 per cent on negative data. The index rose nearly 2 per cent spurring rally in other Asian markets. During the next few days a barrage of data releases will be watched globally. It includes clues on growth and impact of central bank policy in the US, European Union and China, with the Bank of Japan next to meet.
News reports show Beijing and Washington are in general agreement on many crucial issues and have held meaningful discussions on foreign exchange.