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    LIC talk on IL&FS soothes markets, indices gain 1%

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    • BSE Sensex ended up 347 points or 1 per cent at 36,652.06.
    • NSE Nifty reclaimed the 11,000-mark, at 11,067.45.
    • Axis Bank, HDFC, Kotak Mahindra Bank and HUL the top gainers on the Sensex
    UBS said its December-end target of 10,500 on the Nifty suggests that the risk-reward is unattractive despite the recent correction.
    MUMBAI: India’s benchmark indices snapped a five-session losing streak and ended up nearly 1 per cent on Tuesday in a late session surge after state-owned life insurer LIC said it will not allow debt-ridden IL&FS to collapse, raising hopes of an improvement in the nervous credit markets.

    The market had fallen sharply in the last few sessions on fears that there could be a contagion effect of the IL&FS default on the entire financial sector.

    The nervousness over the turmoil in the financial sector continued for most of Tuesday’s session as the market oscillated between gains and losses. Traders, however, covered short positions after LIC, which holds over 25 per cent stake in IL&FS said that all options are open and assured that it will take all possible steps to avoid a contagion spreading to the market.

    The BSE Sensex ended up 347 points or 1 per cent at 36,652.06. The NSE Nifty reclaimed the 11,000-mark, ending up 100 points or 0.9 per cent at 11,067.45. Despite the rebound, Indian stock markets remain the worst performers in the Asian region for September. The Sensex and Nifty had declined 4.7 per cent each in the last five sessions, with most of the fall being concentrated during the previous two trading days.

    Domestic institutional investors (DIIs) stepped up their buying, which provided support to the market. DIIs’ net purchase of stocks totalled Rs 2,284.3 crore, taking their total purchases so far this month to nearly Rs 7,900 crore. Net sales by foreign portfolio investors (FPI) totalled Rs 1,231.7 crore. FPIs are net sellers to the tune of Rs 5,400 crore so far in September.

    Axis Bank, HDFC, Kotak Mahindra Bank and Hindustan Unilever were the top gainers on the Sensex, ending up 2.7-3 per cent.

    The BSE MidCap index also rebounded, ending up 0.4 per cent but the SmallCap index continued to bleed, ending 0.7 per cent lower.

    Among non-banking financial companies, DHFL continued its free fall, ending 23.5 per cent lower at Rs 300.70.
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    Bounceback May Not Sustain: Experts

    Indiabulls Real Estate, GIC Housing Finance and Can Fin Homes ended down between 4.5 per cent and 6.5 per cent.

    Market experts are not convinced that the bounceback will sustain. Crude oil prices were hovering near four-year highs on Tuesday.

    “There were warning signs about the deterioration in the Indian macro indicators and higher risks stemming from the 150-basis point increase in bond yields over the last 12 months and surge in crude oil prices, but the equity market had been ignoring these risks. Now, the froth in the market is coming off and there is re-pricing of risks which were ignored earlier,” said Sanjeev Prasad, co-head, Kotak Institutional Equities.

    “I don’t think market sentiment will change much over the next few weeks. Global issues still pose risks. US-China trade tensions are escalating, and global oil prices could go up further because of the US sanctions on Iran oil exports from November,” said Prasad.

    UBS said its December-end target of 10,500 on the Nifty suggests that the risk-reward is unattractive despite the recent correction.

    “India moves from a benign local liquidity environment to a tighter one, yet the recent NBFC default, non-renewal of Yes Bank CEO’s tenure and tighter bond market spreads have caused jitters. Whether this is a temporary liquidity squeeze or a potential new credit shock remains difficult to gauge,” said UBS in a note. “While unlikely a systemic issue, we worry about a negative feedback loop developing, given rich valuations,” the firm added.

    The outcome of the US Federal Open Market Committee’s (FOMC) two-day monetary policy meeting on Wednesday will be keenly watched among the immediate global events. The FOMC is expected to announce a quarter-point hike in US interest rates at this meeting.




    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

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    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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