The BSE Sensex hit 42,500 levels for the first time and the NSE Nifty 50 index, too, hit a new high of 12,451, tracking a global rally in stocks as hopes of a monetary stimulus in the US rose as Democratic Presidential nominee Joe Biden was confirmed president elect over the weekend, ending uncertainties over who will lead the world’s largest economy as COVID-19 cases continue to surge.
In the morning trade, the Sensex was up 484 points or 1.20 per cent to 42,377.47 points and the Nifty was trading 135 points or 1.1 per cent higher at 12,398.55 points.
Tech stocks, select private banks and automobile companies led the gains on Monday morning. ICICI Bank, Axis Bank, Bajaj Finance and HDFC Bank gained 2-4 per cent. Infosys and Tech Mahindra rose near 2 per cent and Bajaj Auto and Mahindra & Mahindra were up around 1 per cent. Among other major gainers, Bharti Airtel gained close to 4 per cent, Tata Steel rose 2 per cent and Ultra Tech Cement and Hindustan Unilever also gained close to 2 per cent.
Across other Asian markets, Japan’s Nikkei stock average jumped 2.1 per cent, the Hang Seng in Hong Kong rose 1.4 per cent and South Korea’s Kospi was up 1.5 per cent. The Shanghai Composite Index also surged 1.9 per cent.
Biden’s victory is most likely to be a favourable outcome for markets as it will instil confidence amongst investors by reducing policy uncertainty considerably, said Sparsh Chhabra, economist at Centrum Broking.
“The elimination of policy uncertainty will instil confidence amongst the investors and the initial subdued performance caused by the anticipation of tax policies will most likely be offset by more predictable foreign trade policy, relationship with allies/trade partners, coupled with the expectation of higher spending on investment programmes, increasing minimum wage and higher growth prospects,” he said in a note.
Analysts also point out that a Republican control over the Senate would mean it will not be easy for Biden and the Democrats to push through tax hikes as envisaged in the manifesto and as such markets are heaving a sigh of relief. Interest rates are also likely to remain lower for longer.
Donald Trump had taken a tough stance on immigration and had tightened H1B visa rules. It is expected that Biden’s policies will be far more favourable and thus, give Indian software exporters a boost.
“A democrat-led dispensation with a less restrictive trade policy, benign immigration policies will be a key positive for emerging markets, including India,” said Hemant Kanawala, Head – Equity, Kotak Mahindra Life Insurance.
Foreign institutional investors continued to pump in money in emerging markets, including India. So far in November, FIIs have pumped in Rs 6,564 crore in India’s equity markets, taking their total investments in 2020 to Rs 54,452 crore, according to data from depositories. Positive economic indicators like the Goods and Service Tax Collections and strong manufacturing PMI (purchasing managers index) data also augur well for Indian equities, say analysts.
“Indian markets are poised to scale new highs as multiple tailwinds are firing all cylinders—global risk on, favourable set up for emerging markets, strong FPI flows and good domestic cues. Once new highs are scaled, further upmove cannot be ruled out,” said Sageraj Bariya, vice-president – Institutional Sales at East India Securities.