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D-Street bulls on a high over hopes of US-China deal

MSCI will reconstitute its indices on November 26, 2019.

ET Bureau|
Last Updated: Nov 26, 2019, 07.39 AM IST
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It has also recently downgraded outlook on India to negative from stable.
Mumbai: India’s stock indices rallied over 1 per cent on Monday with the Sensex ending at a record close as Asian markets climbed on expectations of progress on the US-China trade deal front. Resurgent foreign fund flows into Indian stocks — on hopes that the US Federal Reserve would continue its easy monetary policy — aided the bullish sentiment.

A senior US official over the weekend said an initial trade agreement is still possible by the end of the year, after Chinese President Xi Jinping and his US counterpart Donald Trump underscored their desire on Friday to sign a deal. The prolonged trade war between the leading economies have been weighing on world markets and a deal would boost sentiments across the globe.

The reconstitution by global index compiler MSCI also fuelled buying. MSCI will reconstitute its indices on November 26, 2019.
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The Sensex ended up 529.82 points, or 1.3 per cent, to a record close at 40,889.23 after logging its all-time high of 40,931.71earlier in the day. The Nifty ended up 164.60 points, or 1.4 per cent, to close at 12,079 after touching a high of 12,084.50 during the day. The 50-share index had last hit an intraday record on June 3 when it touched 12,103.05. Elsewhere in Asia, Hang Seng index jumped 1.5 per cent after pro-democracy parties secured a big win in local elections.

Bharti Airtel was the biggest gainer among Sensex stocks, ending up 7 per cent, on reports that the company had filed applications in the Supreme Court for a review of its judgment on adjusted gross revenue. Tata Steel, IndusInd Bank, Axis Bank, Vedanta, HDFC, Maruti Suzuki India and SBI ended up 2-5 per cent. Yes Bank and ONGC were the only two Sensex constituents to end in the red.

“Foreign flows have been strong in recent weeks and there is talk of US and China coming close to a solution on the trade deal,” said Shiv Diwan, co-head, Edelweiss Institutional Equities.

“I don’t see the headline index moving up significantly from here, but broader markets, which now offer value, will start outperforming now,” said Diwan.

Foreign Portfolio Investors bought shares worth Rs 961 crore on Monday while domestic institutional investors sold shares worth Rs 214 crore. FPIs have bought Indian stocks worth Rs 16,500 crore so far in November.

Foreign fund flows have been strong of late as part of overall flows into emerging markets, which is mainly due to signals from global central banks that their policies will stay accommodative.

India’s GDP data for July-September quarter to be released on Friday will be the key factor to watch out for. Experts said market optimism will be more measured in the days to come ahead of the data.

Recently, Moody’s Investors Service slashed India’s economic growth forecast to 5.6 per cent for 2019 and said that the economic slowdown is lasting longer than previously expected.

It has also recently downgraded outlook on India to negative from stable.

Nitin Bhasin, head of researchinstitutional equities at Ambit Capital, said the current market upmove is mostly due to strong fund flows even as the economic numbers have been weak.

“Economic numbers have not been great but domestic flows have been steady and foreign flows are increasing for last couple of months,” said Bhasin.

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