Mumbai: The markets rose to fresh highs on Wednesday as investors cheered India’s improved rankings in the World Bank Ease of Doing Business survey for 2018. Both the benchmark indices jumped over 1% in early trade.
At 12:20pm, the Sensex was trading at 33,619.4, up 406.31 points, or 1.22%. The National Stock Exchange’s 50-share Nifty gained 0.99% or 102.50 points at 10,437.80.
The government’s reform push such as bank recapitalisation programme, investment in infrastructure and continued inflow of domestic savings into equities are other positives that are boosting the markets.
Here’s a look at five key factors driving the rally:
Ease of doing business
India’s ranking rose 30 notches to 100 in the World Bank Ease of Doing Business survey for 2018 on a slew of regulatory and policy reforms by the government. The report also recognised India as one of the top five reformers in this year’s assessment. The country improved its ranking in six out of the 10 parameters used to measure ease of doing business, becoming the only large economy to do so.
High-frequency economic indicators
Core sector growth, released on Tuesday, hit a six-month high in September, indicating the economy is improving after a disappointing first quarter. The index was up 5.2% in September, compared with 4.4% in August. This comes on the back of several other indicators showing an improvement such as exports, car sales and airline seats. Hopes of an economic turnaround in the markets have also pushed investors to shrug off a decline in the Nikkei Purchasing Managers’s Index which fell to 50.3 in October from 51.3 in September.
Foreign investors upbeat on India
Foreign institutional investors (FIIs) have turned buyers of Indian stocks once again after a sell-off in August and September. In October, FIIs bought Indian equities worth $304.22 million even as domestic mutual funds and insurance firms bought Rs10,090.91 crore. Foreign investment banks have also recently upgraded their price targets. Goldman Sachs Group Inc. and Citigroup Inc. raised their Sensex and Nifty targets, citing the bank recapitalisation programme, infrastructure push and continued inflow of domestic savings into equities.
Untangling GST
While the goods and services tax (GST) has been touted as the biggest reform by this government, it is facing several teething problems due to its complex structure and inadequate IT infrastructure. Now, the GST Council is looking to trim the list of items in the highest tax slab of 28% by shifting some items of common use as well as products made predominantly by small and medium enterprises (SMEs) to a lower tax slab which is expected to boost business. The GST Council wants to address the public perception of high tax rates on certain items of common use as well as give further relief to SMEs, which are labour-intensive.
Index heavyweights support
Stocks with significant weightage in the benchmark indices moved higher on Wednesday. Among gainers, Bharati Airtel Ltd surged 3.3%, while Axis Bank Ltd rose 2.2%. State Bank of India rose 2.1% after it cut lending rates by 25 basis across tenors.