The Sensex and Nifty closed higher on Thursday, erasing their losses suffered on Friday after Britons unexpectedly voted to exit the European Union, as investors focused on improving prospects of the domestic economy.
Domestic sentiment was also buoyed due to short-covering by participants with today being the last trading session of the June series of derivative contracts.
The 30-share BSE index Sensex ended higher by 259.33 points or 0.97 per cent at 26,999.72 and the 50-share NSE index Nifty closed up 83.75 points or 1.02 per cent at 8,287.75.
Among BSE sectoral indices, realty index gained the most by 2.39 per cent, power 2.19 per cent, metal 1.74 per cent and infrastructure 1.67 per cent.
Top five Sensex gainers were Dr Reddy's (+3.38%), NTPC (+3.17%), Axis Bank (+3.11%), Tata Motors (+2.72%) and Tata Steel (+2.7%), while the only two losers were Sun Pharma (-1.00%) and Infosys (-0.49%).
Earnings growth, monsoon prospects
Hopes of a good monsoon and a recovery in earnings have boosted the market, with the broader NSE index surging more than 7 per cent in the April-June quarter, its strongest since April-June 2014 and its first quarterly gain in five.
Shares have recovered some 2.5 per cent since they fell sharply on Friday following the Brexit vote.
“All the bad news like Brexit and Rexit (RBI Governor Raghuram Rajan's exit) is getting priced in and we are definitely heading on the upside,” said B V Rudramurthy, managing director at Vachana Investments Pvt. Ltd.
“Any market will always move up only with good earnings, and this along with a better-than-expected monsoon are fundamental factors which should help markets move higher.”
The positive trend in earnings growth is expected to roll over into the next quarter, with companies poised to report their June-quarter results starting mid-July.
Global markets
European shares fell on Thursday, with a recovery from a heavy sell-off caused by Britain's vote to leave the European Union last week stalled as shares in major banks lost more ground.
The pan-European STOXX 600 index and the similar FTSEurofirst 300 index both fell by 0.6 per cent. The STOXX 600 and FTSEurofirst are both down around 10 per cent since the start of 2016.
Asian stocks rose on Thursday, tracking an overnight rally on Wall Street, while the safe-haven Japanese yen was held in check as global markets regained a semblance of calm after the Brexit shock.
Spreadbetters forecast a slightly higher open for Britain's FTSE, Germany's DAX and France's CAC.