Normal Monsoon Forecast Sends Sensex To Over 3-Month High
The BSE Sensex jumped nearly 500 points, while the Nifty50 index closed above the key 7,850 levels on Wednesday. The Sensex posted its biggest rally since March 1, while the Nifty hit over three-month high. Traders attributed the gains to a spate of economic data points that have sparked hopes for stronger growth this year.
Here are the reasons for the market rally:
1) Forecast for normal monsoon rains, after two back-to-back droughts, was the single biggest trigger for today’s rally, traders said. Normal monsoon rains will help boost agriculture output, which accounts for 14 per cent of India’s $2 trillion economy. Normal monsoon will help revive the farm sector, which has been weighed down by subdued agriculture output and falling farmers’ income. The farm sector supports two-thirds of the country’s population.
2) A revival of the farm sector can boost rural demand, the missing piece in domestic economic growth. Today’s rally was marked by buying in not only agriculture-related stocks (seeds, fertilizer and irrigation), but also saw participation from consumption stocks such as two-wheeler manufacturer Hero MotoCorp and FMCG major Hindustan Unilever.
3) Markets were also buoyed by the fall in retail inflation, which eased to a six-month low of 4.8 per cent in March. Cooling inflation boosts chances of further rate cuts this year and triggered buying in banking stocks.
4) Factory output growth in February was muted at just 2 per cent, but it was the first positive tick in four months. Factor output rose on account of higher electricity generation and mining output, though manufacturing growth continued to be weak.
5) A strong rally across global stock markets also boosted sentiments on the Dalal Street. Global stocks rallied on Wednesday after China released data showing exports grew for the first time in nine months in March. China’s trade data showed signs of stabilisation in the world’s second-largest economy and cheered investors.
The Sensex gained 481 points or 1.9 per cent to end at 25,627, while the Nifty ended at 7,850, rising 141 points.
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Source:Thehindu
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