MUMBAI: When China sneezed, global equity markets caught a cold. And when the world’s second largest economy popped a rate cut pill, calm was restored and major indices, including Sensex and Nifty, rebounded on Tuesday.
The NDA government did its job, intervening just in time, exploring the possibility of convening a special Parliament session for the passage of the Goods and Services Tax Bill. After assurance to pursue much-needed reforms, coupled with a strong rupee — which rebounded to 66.08 on heavy capital inflows and fresh dollar selling — the country’s benchmark indices reversed losses and closed higher.
“As the rupee started to appreciate, the market caught up from Monday’s low. Improvement in developed markets and stability in global currencies are the important reasons for continuing with this positive momentum,” said Vinod Nair, head, Fundamental Research, Geojit BNP Paribas Financial Services Ltd. Allaying fears, RBI deputy governor S S Mundra reiterated that India was capable of dealing with external shocks. “From the viewpoint of where we were two years ago and where we are today, I would believe that in medium to long-term, we are on the right path,” said Mundra.
Aided by domestic and global cues, 100 of the BSE500 index gained over 10 per cent. The BSE Mid-cap index outperformed to gain around 2 per cent, while small-cap index rose 1 per cent. The realty sector, which fell 11 per cent in the previous close, surged 7 per cent on Tuesday, followed by other major indices like metals, oil and gas, auto, banks and power, which rebounded by 1-5 per cent each.
The People’s Bank of China cut interest rates for the fifth time in a row since November. While the move couldn’t prevent the Shanghai Composite Index from sliding, other indices like HangSeng and Dow Jones reversed intra-day losses.